2016 was a great year for the housing market.
Existing-home sales are currently (as of October) at their strongest pace since February 2009, distressed sales reached an all-time low earlier this fall and first-time buyers finally gained some traction despite affordability and supply pressures. All of this adds up to what should be an even stronger 2017, right?
As Lee Corso would say: “Not so fast!”
According to Lawrence Yun, NAR chief economist, the swift rise in mortgage rates poses a threat to a faster pace of sales next year. 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. As a result, many are feeling less confident about buying.
Responses from renters in NAR Research’s fourth quarter Housing Opportunities and Market Experience (HOME) survey revealed waning optimism is already prevalent. Renters who think now is a good time to buy has retreated by a considerable amount over the past year. Fifty-seven percent of renters said now is a good time to buy, which is down from 60 percent in September and 68 percent a year ago.
Yun is hopeful that continued job growth and more millennials reaching their prime buying years will drive demand enough to squeak out a slightly stronger sales pace in 2017. The key will be how much supply comes onto the market to alleviate price growth.
What else does Yun expect for housing and the economy in 2017? His full forecast can be found here.
2017 NAR Forecast Figures
- Existing-home sales: 5.52 million (1.8% higher than 2016’s 5.42 million)
- Prices: $243,300: (3.9% higher than 2016; $234,200 in 2016; 5.3%)
- Mortgage rates: around 4.6% by Q4 2017