Interest rates are increasing. Trump will become President.  Millennials are looking to buy.  The European Union is experiencing shake ups.  How will all of this affect the housing market? No one knows. Change is the only guarantee for the coming year.

• Interest Rates Will Continue to Rise: 

  We have already experienced this after the election results. Interest rates are only expected to continue to rise in 2017 although some predict rates will top out at 5%.  This will affect affordability for first-time home buyers.  It may also negatively impact the market by encouraging some potential buyers to stay put rather than buy.

• Increase in Millennial Home Buyers:

  The average age of a first-time home buyer is 32. In 2017, 4.4 million Americans will be turning 32. Two factors are expected to push Millennials to be home buyers: household formation and wage growth.  As more young adults graduate, marry, and start families, buying is becoming a more viable option especially given recent wage growth.  They are expected to create a lot of demand on the housing market potentially causing prices to rise if supply cannot meet demand.

•   Shortage in Housing Inventory: 

  Low housing inventory will continue to be a problem. Entry-level homes represent the biggest shortage on the market as Millennials shop with a limited budget.  Also foreign investors continue to see the US as a safe real estate investment due to turbulence in the European Union. Foreclosures have continued to decrease cutting off affordable alternatives. The shortage may cause the market to overheat and some predict a small bubble will occur. New construction may help close the gap later in 2017 and into the beginning of 2018 as housing starts increased.  This past October housing starts reached a seasonally adjusted annual rate of 1.3 million – the highest pace since August 2007. That trend is expected to continue which may help balance out the shortage.

• Construction Prices Will Go Up:

  If Trump follows through with his tough immigration plan, it is expected to negatively impact the construction industry.  The current shortage of construction workers is expected to get worse as hiring immigrant construction workers will become more difficult.  The byproduct will be an increase in workers’ wages causing the price of newly constructed homes to increase.  We may also see fewer large-scale remodeling projects on existing homes due to the worker shortage and increased prices.

2017 is expected to have a lot of changes.  By keeping your pulse on the market though, there shouldn’t be many unexpected surprises 🙂

Check out these other articles to see other 2017 predictions:

• Lots of positive trends in today’s housing market

• What will happen to mortgage rates in 2017? 7 expert opinions

• 8 experts predict what the 2017 housing market has in store

• Zillow’s 6 predictions for the 2017 housing market under Trump

• Will 2017 be a buyer’s market or a seller’s market?

• Here are 5 bold predictions for housing in 2017