2017 Housing Trends to Watch
In its broadest definition the real estate sector accounts for 15% of the GDP of the United States of America. That has not recently been the case, but if you expect the U.S. economy to really take off like a race car this year it will be fueled by the real estate sector. Lending standards have been tight following the real estate bubble, builders who survived that bubble have understandably been cautious about expanding their operations.
1. Foreign Buyers
Prices are being driven up to the unaffordable range in places like, Boston, New York and Los Angeles by an influx of foreign buyers. Lately this trend has increased. Buyers from China, for example, are faced with a slowing economy at home and repressive financial policies. They are simply looking for sage places to store their money. The U.S. and Europe provide that safe haven.
2. New Home Construction
New home construction is up about 5% from 1.108 million in 2015.With higher wages looser credit and increased demand from buyers this trend should continue through 2017.
3. Rising Rates
After months of speculation Federal Reserve raised interest rates in December 2016 for only the second time since 2006, and the majority of the members of the Fed's rate-setting board predict there will be three more increases coming in 2017. While mortgage rates will undoubted rise, making it more difficult to buy a home that is the American Dream, this should not dwelt on too much.
Interest rates are expected to increase to around 4.3% on a 30- year fixed rate. Compared to historical norms that is still a great rate.
- More Credit
It is predicted that there will be slightly looser lending standards, which may mean the mortgage money is more readily available the Federal Housing Administration will likely lower fees it charges first-time home buyers, a continuation of a trend begun in the Obama administration, under which it lowered fees in 2015.
Also, starting in 2007, the government-owned mortgage companies Mac and Fannie Mac will begin backing larger mortgages for the first time in over a decade, making it easier for buyers in expensive markets, like Boston, to finance their purchases.
- Medium-sized Cities Growing
Many younger real estate buyers are attracted to medium sized cities because they are being priced out of top-tier economic cities like Boston, New York, Seattle, and San Francisco which have high paying jobs. Housing demand in these cities is strained, because new construction is often unable to keep pace with demand. Due in large measure to geographic constraints, or restrictions imposed by local government regulations.