2016 was a long marathon on multiple fronts. Real estate was no exception. Home sales across the state have leveled as we cross the 2016 finish line. And while prices continue to move up, they did so at a slower pace. These price indicators, along with the fact that interest rates, despite a slight uptick, remain low, reveal clues about what we can expect in 2017.
Let’s take a look at what’s ahead.
- Interest Rates Go Up
Decision-making rests on which way rates go. The math is pretty simple in this equation. Favorable rates encourage people to enter the market. We can point to near-record low rates as the reason home prices and sales keep steady. Expect rates to increase, however, in 2017, but not by much. Whereas we saw rates at 3.6 this year, a 4.0 interest rate is likely to be the new norm moving forward. While the change is moderate, it is not insignificant. If the rate jumps to 4.2 percent from 3.7 percent on a $250,000 mortgage, for example, you’ll be paying around $670 more annually on a fixed loan.
- More People Buying Up
If you’re a homeowner and you’re ready for an upgrade, now is the time to rejoice. Here’s why. Over the last five years or so, the market for mid-sized homes has boomed. That’s good news if you own one of these homes and are looking to sell. Between 2011-15, the average price for a two-bedroom home jumped 59 percent while prices for larger homes grew modestly in comparison. In addition, inventory for larger homes grew by 8 percent. These are ingredients for some home cooking if you’re looking to upgrade and sell your home in 2017.
- New or Old?
A modest jump to existing single-family homes is ahead, according to forecasts. These homes may represent 68 percent of the market and in 2017, sales for these homes are likely to jump 1.4 percent from a year ago. In the same breath, prices for new homes are on the rise as builders look to cover increasing expenditures of construction wages, which may be driven to higher levels in 2017 because of labor shortages.
- Home Value Increase
Here’s some welcoming news: home values will increase at a modest rate. So far this year, home values elevated 4.8 percent. In 2017, projections show home value increases will stay just above 3.5 percent. Some experts believe this slowdown could be the beginning of a new stage as the economy continues to recover. Meanwhile, it could mean a new stage for you, too, if you were fearful of skyrocketing increases in 2017.
- Higher Ownership Rate
Add home ownership rate to the list of increasing figures. Just like prices, interest rates and sales, the rate of people owning homes will expand next year. It’s been a long road to this reality. In 2015, for example, the rate at which first-time homebuyers entered the market matched a 30-year low. In fact, only 32 percent of homebuyers were first timers. 2017 could be the year for millennials after years of uncertainty and the fiscal constraints they endured at the beginning of their adult lives at the hands of the Great Recession. Newfound confidence, rising incomes and the allure of home ownership will push young people to take the plunge in 2017 to increase this important rate.
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