What does 2017 hold for housing?
The new year is just around the corner and it brings with it some changes for the housing market – some exciting and some challenging.
There’s a lot of speculation swirling around interest rates and what a Donald Trump presidency means for real estate. Here are our predictions for what 2017 will bring:
- Interest rates will continue to rise: With the U.S. Federal Reserve expected to raise the benchmark interest rate this week, there’s speculation Fed Chair Janet Yellen won’t stop there. While the Fed hasn’t raised its benchmark rate in a year, interest rates, in general, have been ticking up since Donald Trump was elected president in November. Economists predicted 2016 would be the year the Fed moved away from its near-zero interest rate policy, but that didn’t happen. Perhaps 2017 will be the year.
- A slight price correction: Housing will see a slight price correction, especially in overheated markets, in part due to climbing interest rates. An interest rate hike could deter buyers but will also put pressure on homeowners with home equity lines of credit to sell. According to Housing Wire magazine, “There are indications some homeowners are hesitant to sell their current home because they don’t want to pay inflated prices for their next home, then watch prices drop shortly after they buy.”
- More demand from Millennials: Millennials have been conspicuously absent from the homebuying market for years. But will 2017 be the year these young adults finally embrace homeownership? Surveys have shown that millennials have a strong desire to be homeowners, but a sluggish job market and slow wage growth have been major roadblocks. With the down payment being the biggest barrier to entry, new low- and no-down-payment loan products are starting to spur more interest.
- Boomerang buyers return: Boomerang buyers are those who lost their homes to foreclosure, bankruptcy or short sale during the height of the housing crash finally making their way back to homeownership. Since most foreclosures and bankruptcies require the homeowner to wait seven years until they are able to buy again, homeowners who lost their homes between 2008 and 2009 are now eligible to buy again.
- The refinance market will drop off: Over the past several years, artificially low interest rates have fueled a five-year-long refinance boom that’s on its last legs. Interest rate hikes expected over the next several months will officially put an end to the refinance market. While purchased are expected to pick up significantly, the drop in refinance volume is expected to leave a $400 billion hole in $2 trillion housing market.
While these are only predictions based on the opinions of economists, it’s a good basis for what 2017 will bring. For more information on what 2017 will mean for mortgage, contact one of our mortgage specialists today at (888) 892-4070.