Housing Outlook for Remainder of 2017
It’s a good thing that real estate experts are not Major League Baseball players. If they were, their predictions for the 2017 housing market would have them sitting on the bench. Their strikeouts…that price growth would be slow, that the inventory shortage would bottom out and that mortgage interest rates would climb…
Will batting averages for housing market experts improve for the remainder of 2017? Let’s take a look at some of their crystal ball gazing.
1. Experts (Zillow’s chief economist, Svenja Gudell, Trulia’s chief economist, Ralph McLaughlin, Redfin’s chief economist, Nela Richardson) agree that the shortage of inventory will continue to be a millstone that affects every other housing market statistic. The number of homes currently for sale is equal to the home supply in 1994…and there are 63M move people living in the U.S. today. Zillow’s Gudell said, “…I think we are okay in calling this a straight up inventory crisis at this point…we just don’t have enough homes…and…at some point, something is going to give.”
2. Prices will continue to rise, just a bit more slowly, according to Redfin’s Richardson. Zillow is predicting a 3.2% increase in median home sales prices through the end of the year while Zillow’s Home Value Index forecasts a 6.5% increase from 11/16 to 11/17.
3. Demand will continue to climb. Core Logic and the Case Schiller U.S. National Home Price Index tell us that nationally, home prices are up 5.58% through 5/17. Trulia’s McLaughlin thinks that government policies and millennials are the primary reasons for this projected demand climb. Trump’s push to double standard tax deductions and to dismantle Dodd Frank will both loosen credit restrictions and make house ownership even more enticing. Already in 4/17, Fannie Mae instituted policies that make it easier for borrowers with student debt to qualify for housing loans. And, when the bulk of millennials move into their 30’s, “…they’re going to want to buy homes,” said Zillow’s Gudell.
4. Affordable housing will become even more scarce. The median home sales price was $263,800 in 6/17, according to the National Association of Realtors. Low priced homes are not listing, according to Trulia’s McLaughlin, because twice the owners at the bottom half of the market are underwater. Negative equity doesn’t sell. The median price for new homes in 6/17was $310,800, not an affordable price. Lastly, investors who own the skyrocketing share of single-family homes being rented do not want to sell.
5. Homes that are listed will continue to sell quickly. In 2012, 57% of listed homes took more than 2 months to sell. Today, 47% of listed homes take more than 2 months to sell. Location also plays a card here…markets that have the fewest homes to buy are selling those homes the fastest.
6. Mortgage rates will remain low, volatile but low. Currently, the BankRate average is 3.85% on a fixed, 30-year mortgage. True, the Federal Reserve is raising rates incrementally but at a slower pace than predicted. According to Zillow’s Gudell, “…we just might be entering a stage where mortgage rates are just naturally lower, which, of course, is also keeping up home values.”
Batter up, real estate experts, for the remainder of 2017.