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Real Estate Forecast for 2017

January 30, 2017

 

 

crystal-ball

 

Another year has come and gone so it is time to reflect on what was and what may be!

The year 2016 was unprecedented in many ways and the housing market road the wave-experts anticipated increased building activity but production was still inadequate, prices appreciated beyond expectations with many crossing the 2006 peak mortgage rates toyed with record lows before crossing 4% for the first time in two years.

Here are some trends that shaped our state’s residential real estate market:

  1. Tight inventories. Many homeowners were too nervous to enter the competitive market and cautious of what they might face as home buyers. I helped six clients successfully sell their    current home and buy their new home, most without having to move twice. Through teamwork and strategy it can be done!
  2. Lower home ownership rates. Rates hit a 50 year low, with California hovering at 54%, compared to 63.5 % for the country as a whole (Mortgage Bankers Association). Decreased affordability and millennials delaying purchases were likely the biggest culprits.
  3. Low mortgage rates. Despite a predicted rise, rates continued to go down to near historic lows. Brexit and other news events were contributors. Refinances went up and buyers got more bang   for their buck.
  4. Transaction delays. When the Consumer Financial Protection Bureau required new disclosure forms in October 2015 (TILA-Respa Integrated Disclosure) delays were anticipated.  However, the forms created more clarity and technology adapted well for smoother transactions, with in most cases, only slight delays.
  5. Increase in outmigration. More Californians left in 2016 than since 2011 (California Department of Finance).The silver lining is more inventory from homeowners who leave and sell.

According to Forbes here are eight things housing experts expect to see in 2017:

  1. Prices will continue to rise slowly. Prices rose every month last year (through October) with the largest gains coming in the later half and a 5.61% increase nationally.
  2. Affordability will still be a challenge.  Wages are expected to grow in America’s big cities this year, but the share of homes affordable to someone earning the median income is not. This trend, which has stymied many aspiring to buy their first home, will be intensified by a continued shortage in low- to moderate-priced inventory and rising mortgage rates.
  3. Mortgage rates will fluctuate. The two major political events of 2016 set mortgage rates moving in opposite directions. The British vote to exit the European Union put rates near a record low and the U.S. election of Donald Trump had the opposite effect, sending rates above 4% for the first time in two years. By historic standards rates are still low. In 2017 experts expect movement, but differ on where the 30-year fixed rate will land. Estimates range from between 3.75% and 4.6%–not so far from where it is today.
  4. Credit availability will likely improve. Early Trump administration priorities are not expected to deal directly with housing. However, the president-elect and his team have made it clear they hope to roll back much of the post-crisis financial regulation laid out in the Dodd-Frank Act. This could open up banks to lend more freely to a wide-range of would be buyers. There is speculation that Trump would return government- controlled mortgage companies Fannie Mae and Freddie Mac to private control. Investors cheer the possibility some housing economists worry such a move would further restrict who could get credit.
  5. Supply will improve but remain short.  Declining inventory was the defining feature of the housing  market in 2016. It led to price appreciation, a hyper fast market for buyers, and discouraged would-be-sellers who feared entering the buying fray. A complete turnaround is unlikely in 2017, but there are some signs we could see a small bump in housing supply on the new home front. When it comes to existing       homes “rate lock” may constrain inventory. Homeowners who locked in a mortgage below 4% are likely to stay in low priced homes rather than upgrade, a pattern that last emerged when rates briefly rose in 2013.
  6. More Millennials will become homeowners. According to some estimates, nearly half of buyers are under age 36. Not every economist agrees with this assessment, however it is clear that Millennials (born after 1980 and now the largest adult generation) will continue to make up a growing part of the buyer pool.
  7. Competition will grow fiercer. Sellers will maintain the edge over buyers as demand increases.
  8. Political uncertainty will be replaced with policy uncertainty. Experts agree that three of the President’s priorities could impact the housing market: pledges to spend more on infrastructure, to cut taxes and to crack down on immigration. The consensus is that in the very short term any moves in these areas could have a neutral-to-positive impact on the housing market. Over the longer term opinions vary.

In San Diego the news was good overall- values increased, a majority of properties sold at or over list price, market time shrunk. Low inventory though meant stiff competition and some delays in finding the right property. See the December/year to year statistics.

If you have any future plans you have been keeping secret, now may be the time to review the value of your property with me and I can provide you with a Seller’s Estimated Net Sheet. Sellers that act on their plans to up-size, down-size, change neighborhoods and/or move out of San Diego will create more inventory for all Buyers (including themselves)!

 

 

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