Infographic: Realtors Predict 10% Housing Growth in 2017
Originally published by: Realtor.com — November 30, 2016
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The 2017 housing market will be a year of slowing, yet moderate growth, set against the backdrop of a changing composition of home buyers and a post-election interest rate jump that could potentially price some first-timers out of the market, according to the realtor.com® 2017 housing forecast released today.
2017 national housing forecast
The 2017 national real estate market is predicted to slow compared to the last two years, across the majority of economic indicators. Home prices are anticipated to increase 3.9 percent and existing home sales are forecasted to increase 1.9 percent to 5.46 million homes. Interest rates are expected to reach 4.5 percent due to higher expectations for inflationary pressure in the year ahead.
Realtor.com® is forecasting the homeownership rate will stabilize at 63.5 percent after bottoming at 62.9 percent in 2016. New home sales are expected to grow 10 percent, while new home starts are expected to increase 3 percent. The forecast is based on GDP growth of 2.1 percent, a 2.5 percent increase in the consumer price index and unemployment declining to 4.7 percent by the end of the year.
Prior to this month's election, demographics and an improving economy were laying the foundation for a substantial increase in first-time buyers in 2017, but due to mortgage rate increases over the last few weeks realtor.com® predicts first timers will face new hurdles as they navigate the qualification and buying process. These higher rates are associated with anticipation of stronger economic and wage growth next year, both of which favor buyers. However, higher rates will make qualifying for a mortgage and finding affordable inventory more challenging.
"We don't expect the outcome of the election to have a direct impact on the health of the housing market or economy as we close out 2016. However, the 40 basis points increase in rates in the days following the election has caused us to increase our interest rate prediction for next year," said Jonathan Smoke, chief economist for realtor.com®. "With more than 95 percent of first-time home buyers dependent on financing their home purchase, and a majority of first-time buyers reporting one or more financial challenges, the uptick we've already seen may price some first-timers out of the market."