Thinking about buying or selling a home in 2017?
Here’s what we can expect from the housing market over the next year – Two Reports Predicting the Major Housing Market Trends for 2017
Realtor.com 2017 National Housing Forecast
According to the Realtor.com 2017 Housing Forecast, the housing market will be a year of slowing, yet moderate growth, set against the backdrop of a changing composition of home buyers and a post-election interest rate jump that could potentially price some first-timers out of the market.
At the end of 2016, demographics and an improving economy were laying the foundation for a substantial increase in first-time buyers in 2017, but due to mortgage rate increases over the last few weeks realtor.com predicts first timers will face new hurdles as they navigate the qualification and buying process. These higher rates are associated with anticipation of stronger economic and wage growth next year, both of which favor buyers. However, higher rates will make qualifying for a mortgage and finding affordable inventory more challenging.
“We don’t expect the outcome of the election to have a direct impact on the health of the housing market or economy as we close out 2016. However, the 40 basis points increase in rates in the days following the election has caused us to increase our interest rate prediction for next year,” said Jonathan Smoke, chief economist for realtor.com. “With more than 95 percent of first-time home buyers dependent on financing their home purchase, and a majority of first-time buyers reporting one or more financial challenges, the uptick we’ve already seen may price some first-timers out of the market.”
The report also predicts the top housing trends of 2017 and I have included the two that relate to metro Atlanta:
- Millennials and boomers will dominate the market–– In 2017, the housing market will be in the middle of two massive demographic waves, millennials and baby boomers – that will power demand for at least the next 10 years. Although increasing interest rates have prompted realtor.com to lower its prediction of millennial market share to 33 percent of the buyer pool; millennials and baby boomers will still comprise the majority of the market. Baby boomers are expected to make up 30 percent of buyers in 2017 and given they’re less dependent on financing, they are anticipated to be more successful when it comes to closing.
- Slowing price appreciation– Nationally, home prices are forecast to slow to 3.9 percent growth year over year, from an estimated 4.9 percent in 2016. Of the top 100 largest metros in the country, 26 markets are expected to see price acceleration of 1 percent point or more. Likewise, 46 markets are expected to see a slowdown in price growth of 1 percent or more.
The Atlanta-Sandy Springs-Roswell, GA MSA YOY forecast shows positive numbers for 2017:
Atlanta 2017 Price Appreciation: 5.93% Atlanta 2017 Sales Volume: 2.67%
2017 Realtor.com Home Shopper Survey
The Realtor.com home shopper study, released October 19, and based on September 2016 survey data of active shoppers on realtor.com, provides insight into future home buying trends in 2017 by analyzing responses from consumers who plan to purchase homes in the Spring or Summer of 2017, peak seasons for home purchases.
Significant findings from the survey include a potentially large increase in first time home buyers in 2017, capable of rising to 52 percent of all buyers in 2017, up from 33 percent in 2016. Affordability, down payments, and credit scores are starting to challenge limited inventory as the No. 1 barrier to home ownership. Suburban homes are the most preferred as 43 percent of first time home buyers have a stated preference for the suburbs, likely due to their desire for safe neighborhoods, privacy and to meet the needs of their growing families.
- First time home buyers could make up over half of the 2017 home buyer population
The most notable characteristic of the 2017 home buying season is expected to be the large number of first time home buyers entering the market. According to the survey, first time home buyers now make up 52 percent of prospective buyers looking to purchase in 2017. Last year, 33 percent of shoppers planning to purchase in 2016 were first timers. Millennials are leading the pack with 61 percent of these first-time homebuyers under age 35. Top reasons cited by millennials for buying include getting married or moving in with a partner, growing tired of their current living space, and planning to increase family size.
Said Jonathan Smoke, chief economist for realtor.com:
“With so many first time buyers in the market, competition will be even fiercer next year for affordable starter homes in the suburbs. Those looking to buy may want to consider a winter home purchase in order to avoid bidding wars and higher prices spurred by a potential increase in millennial buyers.”
- Affordability and mortgage qualification expected to replace lack of inventory as the largest barrier to home ownership
In 2016, 40 percent of home shoppers cited lack of inventory as the largest barrier to home ownership, but realtor.com reports this will potentially shift to affordability and mortgage qualification issues as more first time home buyers enter the market. Of first time home buyers planning to purchase next spring surveyed in September, 37 percent indicated their largest impediment to home ownership is the down payment and 30 percent cited finding a house within their budget.
- Safe neighborhoods, more living space, and larger yards top list of key home attributes
First-time homebuyers cite safety, more living space, and larger yards as the key features for their new homes. This is consistent with their top goals of buying: attaining privacy and addressing the needs of their families. A third top objective of first time buyers is to make a financial investment that will grow over time.
As millennials marry and move in with partners, reasons to purchase are driven by actual or planned growth in their families, and they show strong preference for single family homes (39 percent) or townhomes (34 percent) and away from multi-family homes (15 percent), condos (10 percent), or mobile homes (2 percent).
- Competition for the suburbs is expected to heat up
With families and safety on the brain, it’s no surprise that first time home buyers identified the suburbs as their No. 1 preferred location. In fact, 50 percent of all respondents identified suburban areas as their preferred location. For boomers, their desire for the suburbs can likely be attributed to their desire to be close to family and friends.
Data also show younger homebuyers are more likely than their older counterparts to prefer urban living, the second-most common location preference among millennials after suburbs.
- Spring and summer will continue to be the hottest times to buy a house in 2017
A majority of all survey respondents were beginning the housing search at the time of the survey and planned to purchase in seven months or longer, indicating spring and summer will continue as the top seasons to buy and sell homes. Realtor.com® found that 73 percent of respondents had been considering homeownership for less than three months and did not expect to purchase a home immediately.
Some of these national trends are playing out in our local markets – for information on local market trends for East Cobb, North Fulton, and Greater North Atlanta, contact Robert Whitfield 678-585-9691.