Every time a new year rolls around, people love to predict what the future will hold. For some, this means setting resolutions that they will (most likely) give up on by the end of the year. Oftentimes, it can be difficult to predict what the future will hold, on both personal and global levels. This year, we have a new president whose choices could have profound impacts on the economy and the real estate market as a result. The economy is volatile and subject to change… wars could break out, an asteroid could strike the earth, the apocalypse could come. Not saying those last few things are likely, but my point is that anything could happen.
As a real estate professional with over 20 years of experience, I’ve been in the field long enough to know that real estate is one sector of the world that can be reasonably easy to predict based on past trends and behaviors. Not only that, but it is essential for both real estate agents and buyers/sellers to stay up-to-date on real estate trends so that they can make informed decisions based on the current market.
If you’re looking to buy and/or sell a home this year or you’re a real estate agent wanting to achieve the best outcomes for your clients, then it pays to do your research. Luckily, I’ve already done some of it for you. Here are some of the top trends to look out for this year, according to industry experts.
1. Housing boom in suburbs and mid-sized cities
The years following the housing crisis saw a rise in the number of people moving to large cities like New York, Los Angeles, and San Francisco because real estate was more affordable. Now, however, as the market is in a gradual state of recovery, home prices are on the rise, and buyers are flocking to the suburbs for more affordable housing. While the major cities will always be a hub for jobs, especially for younger people, the suburbs and mid-sized cities are typically the more affordable option. According to Svenja Gudell, Chief Economist for Zillow, “Now we see people like to live close to the city center where they’re close to amenities and in walkable neighborhoods, but for the first time they’re not able to find enough inventory that’s affordable for them to buy.” Additionally, many young adults looking to buy their first homes are attracted to mid-sized cities (Raleigh, North Carolina, for example) for the cheaper rents and lower housing prices that they offer.
2. Millennials and baby boomers will take up a large share of the market
As the millennial generation comes of age, more and more will be looking to start families and buy their first homes in 2017. The younger end of this generation may be more attracted to rental properties early in their careers. Still, the older end (those in their early to mid-thirties) will start to mortgage homes due to a variety of factors, including more jobs targeted at workers between the ages of 25 and 34, and increased wages. On the other end of the spectrum, many baby boomers are reaching retirement age and will be purchasing retirement homes. According to Jonathan Smoke, chief economist of Realtor.com, some retirees will want to downsize to cut back on expenses, but a large proportion (now that their buying power has improved after the housing crisis) are purchasing large homes to accommodate children and grandchildren.
3. Home values will increase, but at a slower rate than last year
Home values will continue to increase at a rate of about 3.6. This would be a slight decrease from last year when national home values rose 4.8 percent. As the market recovers from the housing crisis, the increase in home values will start to level off. This slowdown in appreciation rates is an inevitable effect of the housing market normalizing after the crisis, according to Gudell and Smoke.
4. Rent affordability will improve
Good news for twenty-somethings struggling to pay rent each month on their entry-level salaries! Real estate experts predict that rent prices will become more affordable across the nation as the rate of income growth is outpacing rental rates.
5. Mortgage rates will increase
While there are some, who are fearful that the Trump presidency will lead us back into recession due to his plans to cut government spending, real estate professionals are optimistic. Rick Sharga, executive vice president of real-estate auction site Tex-X, believes Trump’s presidency will positively affect the housing and mortgage markets in the long term, and home buying will stay steady throughout 2017. Home prices and mortgage rates are expected to continue to rise after the housing market crash of 2012. From a buyer’s and seller’s perspective, it makes sense to act sooner rather than later if you’re planning on buying/selling a home.
6. More new construction
As home values, in general, continue to increase, so too will the price of new construction, exacerbated by a shortage of labor in the construction industry, forcing contractors to offer higher wages to compete for workers. Prices will increase for buyers to offset these costs. Yet, despite increases in the costs of new construction, the rate of new construction will increase as well based on the trends of the last few years, and the fact that higher wages and more flexible credit are giving home buyers more spending power.
7. Rise of the drones
Advancements in technology are expected to play a part in real estate trends this year as well, in the form of drones. Some real estate agents have already been using drones to capture flyover images of properties, and now (thanks to new regulations from the Federal Aviation Administration) homeowners can use them to take their own images of their homes, even using them as a way to bypass the home inspection.