We are a month into the new year and with it have come new factors which will affect real estate for the rest of the year. Below New York Power Broker Louise Phillips Forbes of Halstead Property predicts what the real estate market will look like a on a national scale in 2017. So be aware and keep an eye out on the following:
- Increased interest rates will change the game.
While interest rates are still some of the lowest they’ve been in years, they are increasing. Rising interest rates will motivate buyers to act quickly in the first quarter to lock-in reasonable long-term loans enabling them to make long term buys.
- The market is re-setting, not declining.
This year nationwide, home prices are predicted to slow to 3.9 percent growth year-over-year. The biggest shift will be in the ultra-luxury market. As a result, New York City in particular is experiencing a very efficient re-setting of the high-end luxury sector with values down 25-40 percent to more realistic prices, which establishes a growth pattern much more in line historically.
- Millennials and baby boomers will dominate again.
For the next 10 years these two demographics will power demand. They are approaching life changes that motivate people to buy or sell a home. In 2017 baby boomers have the potential to make up 30 percent of buyers and millennials are expected to make up 33 percent of buyers.
- The Midwest is the new frontier.
Due to escalating rents and inflated home prices in the coastal cities, millennials are drawn to the Midwestern market because of the low cost of living and the tremendous job growth. In 2016, Midwestern cities claimed 42 percent of millennial purchase, much higher the U.S. average of 38 percent.
- Foreign buyers expand their border beyond coastal cities.
International buyers still look to the coastal cities, New York, Los Angeles and San Francisco real estate as a safe haven for their money. However, with the escalating price per square foot they have begun to look at other cities around the country such as Nashville and Austin.
- Consumer confidence will boost home sales.
With the anticipation of stronger economic and wage growth in 2017, home sales could exceed 6.3 million transactions, a significant increase from 2016. The GDP growth is forecast to be 2.1 percent with a 2.5 percent increase in the consumer price index, while unemployment is expected to decline to 4.7 percent by the end of 2017.
- Lack of inventory spurs fast-moving markets. Buyers should be prepared.
Inventory is currently down an average of 11 percent in the top 100 metropolitan markets nationwide, but with interest rates on the rise, prices may go down slightly. A slowdown in home price appreciation could motivate more property owners to sell, easing some of the inventory crunch. Regardless, in a competitive market, buyers need to be prepared and able to act quickly when they find their dream home.
Click here to get more details on what to look out for in the 2017 real estate market.