Home sweet home might be taking on a new appearance for many consumers as the way we live changes.
Real estate is a booming business, but one that will need to accommodate consumer demands.
This week, an examination of anticipated housing happenings for 2017. How will you and your members be affected?
‘Your home is your refuge.’ –George Carlin
National Mortgage News provides “5 Housing Market Predictions for 2017.”
Boomers and millennials will fuel demand for housing, comprising 30% and 33% of all buyers, respectively. Millennials increasingly will choose to buy in the Midwest with its better affordability.
This is a continuation of a 2016 trend whereby millennials captured 42% of Midwest home sales, compared to 38% of the market in other areas.
Also, 2017 home price increases should dip to 3.9% from 4.9% in 2016. Inventory is predicted to lessen further; median days on market will be 68 for the top 100 metro markets.
Finally, the West will note home price growth of 5.8% and sales will be up 4.7%.
More news on the millennial influence is found at northjersey.com. Here, note this cohort comprised the biggest generation of buyers in 2015—35% of all buyers, and 67% of millennials were first time buyers.
Plus, more millennials purchased homes without financial assistance from their parents. In 2016, 24% tapped relatives or friends for down payments, compared to 27% in 2015.
“Total housing starts plummeted in November, but they will rebound in coming months,” says Kiplinger.
Multifamily unit starts were down 4.1% from a year ago, and dampened overall housing production by 18.7% in the previous month.
Kiplinger also predicts existing home sales will fall in the upcoming months.
Forbes weighs in with “Eight Predictions from the Experts.” Experts agree there will be slower price growth, lesser affordability, low inventory, and big influence of millennials.
But they suggest mortgage rates will be range between 3.75% and 4.6%, that it will be a seller’s market, and that “political uncertainty will be replaced with policy uncertainty” given a new presidential administration.
‘People who live in a glass house have to answer the door.’ --Karl Pilkington, comedian
More housing market insights are gleaned at Fortune. Despite rising rates, expect greater credit availability due to loosening lending standards.
Also, medium-size cities will grow as jobs in big cities attract workers but housing availability drops. New construction in big cities is hampered by geographic limitations and regulatory restrictions; mid-size municipalities may have fewer job opportunities, but greater housing affordability.
Finally, Fortune says “foreign buyers aren’t going away,” especially those from China who seek “safe places to store their wealth, away from the slowing economy of the homeland…”
As a consequence, “U.S. and Europe continue to attract growing amounts of foreign capital.”
Equity will grow for some consumers, says a post at smartasset.com. “While the National Association of Realtors is projecting a slowdown in home prices, other housing industry experts are taking a different stance,” the article reports. “CoreLogic, for example, is forecasting a price increase of 5.2% through September 2017.”
This translates to nice equity growth for some homeowners, and allows greater potential for renovation with increased borrowing ability.
‘It is not the beauty of a building you should look at; it’s the construction of the foundation that will stand the test of time.’ --David Allan Coe, songwriter
An article from Inc. says “Mortgage companies are getting increasingly competitive” due to automation and improvements in machine learning.
Loans are processed at a faster rate than ever, and some lenders promise pre-approval within half an hour. “But depending on the paperwork… it often takes two weeks or more.”
A PwC report, “Emerging Trends in Real Estate—Top 10 Trends for 2017,” examines the impact of blockchain technology in real estate. The charge for change in real estate processes is led by financial providers.
“An argument exists that once financial firms deploy a technology, others must follow if they want to maximize the use of financial services.”
Another influence in real estate is that of bank regulatory issues.
Commercial banks took last place in the PwC survey on debt capital availability, and “banks will be dejected,” according to one finance specialist.
The explanation is a “learning curve” as banks operate under new guidelines. Caution is pervasive because even though banks “passed their stress tests in 2016,” such tests lack transparency and banks do not know how they will be evaluated.
The result is a lending environment that is “too costly and too uncertain,” the report notes.
Still, the lending situation is not dire. Commercial banks will remain, and due to demand for real estate loans, other lending entities will fill any gaps resulting from “shifts at the commercial banks.”
Shadow banks have lesser oversight and offer “moderate to high leverage without recourse,” according to PwC. “Shadow banks’ market share is increasing, although no one truly knows by how much.”
Realtor.com says the rate of homeownership should level off at 63.5% from the depths of 62.9% in 2016. Sales of new homes will rise 10% and new starts will be up 3%.
First-time buyers will likely encounter challenges in qualification with rising interest rates in an increasing wage environment. Low inventory will pose additional problems.
This week, research findings indicate lending innovations, technology, and even the environmental impact of one’s dwelling will be influential in the 2017 real estate environment.
Whether consumers are choosing to reside in a microapartment or yurt, or should local preferences dictate purchase of new or existing housing, do you know how you and your members might respond to 2017’s expected housing market?