Here at Group O’Dell, we read and listen to all the housing experts and economist, so you don’t have to. Here is our best synopsis of what Housing Industry Experts and Economist have to say about the 2017 Housing Market.
Rates Will Rise
These last few years of historical low rates did not generate anything more than modest economic growth. Rates have been low, in part, because of bad government policies that reduce economic growth. Removing those hurdles to growth will boost rates, but won’t be a headwind for housing. Everyone we follow is expecting mortgage rates to hit 4.5 percent and land at 5 percent by year’s end.
With an “interesting” election behind us, whether you like the results or not, the markets and economy seem to be headed upward with interest rates following. Interest rates are ticking up for a reason and that reason includes expectations for faster economic growth and perhaps a little more inflation. But growth and inflation mean faster wage growth, more jobs and expectation of rising rents and housing prices. Keep in mind home prices are still artificially low relative to rents.
Yes, it’s time for some inflation and growth in the economy. In Kansas City, our low unemployment rates and low housing inventory can withstand some inflation and rising rates because we aren’t in a housing bubble.
2017 Will be the year of the Home Seller
The main way housing contributes to economic growth is through home building and the pace of construction. Based on population growth and scrappage, we should be starting about 1.5 million homes (nationally) per year, versus the 1.2 million we’ve actually experienced over the past few years. This is the reality of the current inventory shortage even here in Kansas City.
Higher rates could also stymie the existing-home sale market as sellers decide to stay put instead of trade up at a higher mortgage rate. Remodeling a home or aging in place, is becoming more and more of a reality for scores of boomers further stagnating home inventory.
Some experts expect home sales to decline (because of inventory shortage) and home prices to continue to rise to about 3.5 percent.
Strong economic growth impacts wage growth and that’s good news for home buyers; however, rising rates could put pressure on buyers to act.
With a U.S. President who earned his billions in luxury real estate, the high-end market will have a revival as rich people who have been hoarding their cash and hiding out from the redistributionists will tiptoe back into the market.
But tastes will change. Walkable neighborhoods will become the Cartier wrist bands of real estate, guard dogs in tow.
Don’t expect the Do It Alone Seller to solve any problems with inventory. The rate of people selling their home For Sale By Owner is actually down. The average has been 12% since 1981. In 2016, the number of homes that sold For Sale By Owner was 8% – 50% of those 8, were inter- family/ personal transfers.
Our upcoming seminars we will discuss these predictions and how they impact “What Important Steps to Take Before you Post a For Sale Sign in Your Yard” and “Don’t Be Taken Advantage of in a Tight Market When Buying”.
If buying or selling real estate is part of your 2017 goals, call us today and let us guide you with our experience and market knowledge.