With the new year rapidly approaching, various news outlets have rolled out their predictions for the housing market in 2017. Among these is Forbes, which recently released its five trends that will “shape the housing market” in the new year.
- Rising Interest Rates
- More Credit Available
- More New Homes
- The Continued Rise of Medium-Sized Cities
- Foreign Buyers Will Continue Their Spending Spree
Rising interest rates, which began earlier this month with just the second increase since 2006, will continue in 2017. In fact, the Federal Reserve board said it expects to make three rate increases in the next year. However, it really isn’t as daunting as it sounds. The chief economist for Redfin, Nela Richardson, recently wrote she expects rates to go no higher than 4.3 percent on a 30-year fixed loan. That’s still an excellent deal when you consider historic norms.
While higher rates will certainly have an impact, one trend that could offset any negative consequences is increased credit availability. Richardson also wrote Redfin expects mortgage credit to be more widely available in 2017 because of looser lending standards. For starters, it’s expected the Federal Housing Administration will lower fees it charges first-time home buyers. This would be the continuation of a trend started by the Obama administration in 2015. Second, Fannie Mae and Freddie Mac will begin backing large mortgages for the first time in more than a decade. For buyers in expensive markets, this will make it easier to finance their purchases.
More new homes are also predicted for 2017. This year, groundbreaking on new homes reached an annual rate of 1.63 million, which is up about 5.0 percent from 2015. Forbes noted home builders remain encouraged by higher wages, increased demand and looser credit, so this surge in new home construction is likely to continue next year.
Medium-sized cities have gained in popularity among home buyers as major cities like New York and San Francisco are simply getting too expensive. Forbes notes young professionals are increasingly turning to medium-sized cities which, despite not having the same professional opportunities, boasts affordable housing.
Finally, foreign buyers–a driving force in the housing market in recent years—will continue their strong buying activity in 2017.
By all accounts, 2017 should be another strong year for the U.S. housing market. Increased credit availability and more new homes adding to supply should more than offset any concern of rate increases.