The holiday season is over, but the home-buying season is quite the contrary. Let’s remember the predictions for the outgoing year, review the 2016 home-buying season and try to assume what it all means for 2017.
Customers Want “New” Homes
In comparison with the previous years, the good news is that customers want to buy their own home, so the sales of newly built homes are better now.
However, people who already own a home, have recently been too cautious to upgrade it, which resulted in existing sales on homes go down. This, in its turn, has led to low existing-home inventory.
REFIs Have Dried Up
People have greatly overstated the stoppage of REFIs for a long time, but the latest analysis and data proves that it may finally be here. Let’s just assume that, in the first place, those buyers who got the right for REFIs have already done them.
Secondly, rates won’t get any lower (they simply can’t). Everybody knows that the mortgage industry has been growing due to REFIs, which were its biggest growth driver. Now, banks will have to look for new opportunities to encourage borrowing and new purchases.
Strong Confidence of Homebuyers
Millennials are often classified as financially conservative. These people tend to be more careful about their money and on what they spend it.
However, even having security, political and economic concerns that are beyond their control, they still want to own. Millennials like to control the renting affords and are used to flexibility. The recent survey also shows that 85% of people plan to live in their new homes for less than seven years.
Taking into account this fact, potential buyers need even more confidence and assurance than a 20-year mortgage actually provides (check how to buy a house with no down payment). Homebuyer confidence is strong, although women tend to be much more cautious than men. They need even more security before they will make a decision towards upgrading or buying.
Low Rates Continue
The key indicators of economic growth are international economic matters such as Brexit together with GDP. In spite of higher confidence from the side of consumers as well as lower unemployment, the interest rates haven’t been raised yet because of these key indicators.
However, such low rates for such a long period of time will definitely influence new home sales in the future.
After a little while, the rates will inevitably go up. This may lead to the situation when potential homebuyers will hit the panic button and pull back. The advantage of rising rates is that it will inevitably lead to decreasing home prices.
So what about plans for 2017?
They are uncertain. Home prices may probably return to normal and drop for some reasons. First of all, this is the way markets actually work; they tend to go up and down. Real estate value has increased over the long term.
So, if currently it has gone up, it’s quite natural that there will be some correlation in the overheated markets.
Another reason is that inventory will rise. Nowadays, new construction tendency has shifted from multifamily to single-family homes. It means that this market will most likely become less competitive.
If public policy efforts succeed, tackling affordability problem will also have a certain impact on the prices.
In general, there are a lot of things to think about. Let’s take this opportunity to revalue the way we tackle expectations of the new generation of homebuyers to continue the work of the purchase engine.
P.S.: Know hidden costs when buying your first house.