The housing market is on the edge of 2017. A quick look back on 2016 shows a year filled with thoughts on Millennial homeownership, low interest rates and drastically low inventory.
Next year doesn’t look like it will be too different, according to the realtor.com 2017 housing forecast. The report predicts the 2017 housing market will be a year of slowing, yet moderate growth.
As a result, realtor.com said next year’s predicted slowing price and sales growth, increasing interest rates and changing buyer demographics are setting the stage for these five key housing trends:
1. Millennials and boomers will dominate the market
Although increasing interest rates have prompted realtor.com to lower its prediction of Millennial market share to 33% of the buyer pool; Millennials and Baby Boomers will still comprise the majority of the market. Baby boomers are expected to make up 30% of buyers in 2017 and given they’re less dependent on financing, they are anticipated to be more successful when it comes to closing.
2. Midwestern cities will continue to be hotbeds for Millennials
Midwestern cities are anticipated to continue to beat the national average in Millennial purchase market share in 2017 with Madison, Wisconsin; Columbus, Ohio; Omaha, Nebraska.; Des Moines, Iowa; and Minneapolis, leading the pack. This year, average millennial market share in these markets is 42%, far higher than the U.S. average of 38%. With strong affordability in 15 of the 19 largest Midwestern markets, realtor.com expects this trend to continue in 2017 even as interest rates increase.
3. Slowing price appreciation
Nationally, home prices are forecast to slow to 3.9% growth year over year, from an estimated 4.9% in 2016. Of the top 100 largest metros in the country, 26 markets are expected to see price acceleration of 1% point or more.
4. Fewer homes on the market and fast moving markets
Inventory is currently down an average of 11% in the top 100 metros in the U.S. The conditions that are limiting home supply are not expected to change in 2017. Median age of inventory is currently 68 days in the top 100 metros, which is 14%– or 11 days – faster than U.S. overall.
5. Western cities will continue to lead the nation in prices and sales
Western metros in the U.S. are forecast to see a price increase of 5.8% and sales increase of 4.7%, much higher than the U.S. overall. These markets also dominate the ranking of the realtor.com 2017 top housing markets.