The biggest factor for 2017 is Donald Trump. Bringing business back to the US may come with a big price — a high dollar and strong inflation. Other major factors are the rising influence of millennials to shifting trends in home prices and housing inventory, here’s a look at the top housing market trends for 2017.
More Millennials will become homeowners
Trump has spoken on another matter that might seem inconsequential – that of forgiving student loan debt after 15 years. Young people including Millennials can’t buy homes because of massive student loan debts that kill their credit scores and keep them unable to save for the downpayment.
If student loan debt is eliminated Millennials would be able to save for a downpayment much easier. Combine that with the fact that Millennials are now the largest adult generation and make up the greatest percentage of the workforce this generation is expected to dominate demand in the housing market for the next decade comprising 33% of the buyer pool.
Supply and demand
A declining inventory was without a doubt the defining feature of the housing market in 2016. It led to price appreciation, as well as a hyper-fast market for buyers and discouraged would-be-sellers who feared entering the buying fray.
A complete turnaround is unlikely in 2017, with the number of homes on the market continuing to dwindle since the conditions causing the current inventory constraints are not expected to let up.
The “Trump Effect” – Mortgage Rate Trends
There were two major political events in 2016 that set mortgage rates to move in polar opposites; in June, the British voted to exit the European Union which put rates near a record low and in November, the U.S. election of Donald Trump had the opposite effect; which sent rates above 4% for the first time in two years.
By historic standards, rates are still low. In 2017 experts expect movement, but with no sure way to know, they speculate and differ on where the 30-year fixed-rate will land. Estimates range from between 3.75% and 4.6%–not so far from where it is today.
However, with the rise above 4%, some homeowners are locking in their home loans at the 30 year period. Some are calling this the “Trump Effect.”
In addition, with Trump in power, lending requirements are expected to be eased. Add that with employment growth and wages moderating upward, the market is set for growth. Yet, some housing forecasters still cling to the idea that housing starts will moderate after strong growth to 2020.
Credit availability will improve–maybe.
The president-elect and his team have made it clear that they hope to roll back much of the post-crisis financial regulation laid out in the Dodd-Frank Act. Theoretically, this could open up banks to lend more freely to a wide-range of would-be buyers, but not everyone is convinced this type of lending is the direction banks would go with any new-found freedom.
Meanwhile, there is speculation that Trump would return government-controlled mortgage companies Fannie Mae and Freddie Mac to private control.
Politics versus policy
Political uncertainty will be replaced with policy uncertainty. Experts agree that three of President-Elect Donald Trump’s policy priorities could meaningfully impact the housing market: his pledges to spend more on infrastructure, to cut taxes and to crack down on immigration. The consensus is that in the very short term any moves in these three areas could have a neutral-to-positive impact on the housing market. Over the longer term, however, opinions vary widely.
The future is still bright for the West
While gains will be made elsewhere in the country, the West is still expected to outpace the rest of the country in terms of home prices and sales. Predictions are that home prices in Western cities will increase on average 5.8% and sales are expected to rise up 4.7%.