Realtors®’ Housing Expectations for 2017
As another strong year for the housing market has come to an end and the calendar turned over to 2017, it is time to examine the housing outlook and expectations for the new year.
Existing-home sales are forecast to muster only a small gain in 2017 because of increasing mortgage rates and shrinking consumer confidence that now is a good time to buy a home, according to new consumer survey findings and a 2017 housing forecast from the National Association of Realtors®.
NAR’s Housing Opportunities and Market Experience (HOME) survey, which asked respondents about their confidence in the U.S. economy and housing expectations for 2017, recently found that 68 percent of homeowners think now is a good time to make a home purchase compared to 82 percent in December 2015.
Even with this dip in buyer enthusiasm, the market did well and existing sales closed 2016 3.3 percent higher than 2015 and reached around 5.42 million — the highest since 2006 when sales totaled 6.47 million.
In 2017, sales are forecast to grow roughly 2 percent to around 5.52 million. The national median existing-home price rose to around 5 percent in 2016 and is expected to rise to about 4 percent in 2017. By the end of next year, mortgage rates are expected to reach around 4.6 percent.
“Existing-home sales are expected to see little expansion in 2017 because of affordability tensions from rising mortgage rates and home prices continuing to outpace income growth,” said Maurice Taylor, 2017 President of the Arkansas Realtors® Association. “Ultimately, the market needs to see a growth in for sale inventory, otherwise the nation’s low homeownership rate will struggle to rise in 2017.”
Here are a few of the trends and predictions the Arkansas Realtors® Association expects to see play out in the new year.
Tight inventory conditions will continue. Recent data from NAR show that the supply of existing homes for sale is insufficient, and new home construction is not meeting demand. More buyers are competing for a fewer number of affordable homes than a year ago, which will likely continue in 2017.
Increasing home prices. With demand rising and listings scarce in many markets, NAR forecasts home prices will increase nationally about 4 percent in 2017. In cities with the tightest of supply, prices could expand above double digits.
Rising mortgage rates. The recent rise in mortgage rates will likely continue in 2017 with additional increases. “With inventory tight and prices already rising far above incomes in some areas, the unwelcoming sign of higher borrowing costs only adds to the difficult barrier of entry for many prospective buyers,” said Taylor.
Waning consumer confidence. Declining affordability in many parts of the country has been weakening consumer morale. Rents and home prices outpacing incomes and scarce supply in the affordable price range will continue as a prominent headwind for many prospective buyers this year.
Buying a home can sometimes be a challenging process, but with a little work and a Realtor® – a member of the National Association of Realtors® – at your side, 2017 may be a good time to start looking.
Visit www.realtor.com/realestateagents] to speak with a RealtorÒ for information and advice about buying a home in 2017.
House to House is distributed weekly by the Arkansas REALTORS® Association. For more information on homeownership in Arkansas, readers may visit www.ArkansasRealtors.com.