Real estate is never an exact science, but its an industry that has people talking all the time. What will 2017 bring to real estate markets across the country? Will agents be popping the bubbly or watch another housing bubble brew? Chief economist for Zillow, Svenja Gudell, and Chief economist for Realtor.com, Jonathan Smoke, give CBS Moneywatch their take on the 9 real estate trends to watch in 2017.
#1 Millennials and Boomers will be BIG on buying. With most of the new jobs being created for the 25 to 34 crowd and rising wages to go along with them, the oldest of the Millennial generation will be putting down roots. On the flip-side, the older end of the boomer generation is in their late 60’s and ready to move both to bigger homes to accommodate visiting grandchildren, and also to smaller homes to control their retirement expenses. Be ready to serve both of these changing populations!
#2 Home values will increase at a slower pace. While 2016 saw home values increase at a rate of about 4.8 percent nationally, in 2017, the growth will be around 3.6 percent. “As the market recovered from the housing crisis, ‘for a while, we were growing at very high home-value appreciation rates,’ Gudell said. “What we’ll see for next year are more historically normal appreciation rates in line with what we’ve seen over the last 50 or so years.”
#3 Migration back to the ‘burbs! While the housing bust allowed people to take advantage of lower prices in the cities for a few years, with a stabilizing market, prices are going back up and people will be heading back to suburbia for more affordable homes. So, sharpen your knowledge of your local neighborhoods to take advantage of this shift!
#4 New Construction? Get ready to pay even more! A labor shortage in the construction industry is forcing builders to compete for workers with wages and the cost is being passed onto the buyers. In addition, should President elect Trump’s policies on immigration go through, the deportation of workers who normally find work in the construction industry will only add to this problem.
#5 Midwestern Cities will be hopping with Millennials. It used to be that after college, young people would flee to the coastal cities, but it seems like many are going to opt to stick closer to home. With large universities and more bang for the buck when buying a home, Realtor.com predicts “millennials will settle in Madison, Wisconsin; Columbus, Ohio; Omaha, Nebraska; Des Moines, Iowa; and Minneapolis, Minnesota,” Smoke said.
#6 West Coast prices on their way UP! Like it wasn’t already expensive enough, expect prices to continue to rise in cities around Northern CA, Seattle, Portland, Denver, Tucson and Phoenix. During the economic recovery, these markets experienced the most job growth and as the people follow the jobs, housing prices will go up with the pace of demand.
#7 City Living = Smaller homes, close to public transit. For those in major markets, this will be an interesting trend to watch. After the 2016 Zillow Housing Roadmap events, Gudell said this: “The number one issue many mayors and cities face is affordability. A lot of them are addressing this by building smaller homes — which take up less space so they can build more of them — and by developing public transit so people can move away from the city center and still have access to it.” This could be a game changer for agents in these high priced markets and their weary of waiting buyers!
#8 Rents staying reasonable. Those who are still renting can do a happy dance, since Zillow predicts rents to rise by only 1.5% in 2017. Gudell says, “This is due in part to an increased supply: A lot more multifamily rental units are being built, and many renters have doubled up with roommates. These two things have helped supply rise to meet rental demand.”
#9 Mortgage rates on the rise. Buyers who have been sitting on the fence will want to jump off – and soon, according to what Jonathan Smoke says about the Federal Reserves plans. Three increases to the benchmark rate are expected in 2017, after years of post-recovery record lows. What does this mean? Winter and early spring are the time to buy, which could give agents an early padding to their pocketbook!