The year 2016 proved to be a hot one for real estate.
Home values, prices and sales showed some of their strongest numbers since before the economic downturn a few years ago.
And mortgage rates were downright cheap.
But thereâ€™s no guarantee favorable conditions for buying and borrowing will continue in the months ahead.
Consequently, itâ€™s fair to ask the question: Will housing prices keep climbing into 2017?
Industry experts weigh in. Though no one can tell the future, their housing market forecast can help first-time home buyers make better decisions this year and next.
Should you buy now, or wait? Here is advice from leading experts.Click to see today's rates (Aug 19th, 2017)
First, a closer look at the current climate on housing prices nationally.
Home prices continue to post steady year-over-year gains and are nearly back to pre-recession highs, based on 90.6 million U.S. single-family homes and condos tracked by real estate data firm ATTOM Data Solutions.
In July, for example, the national median home price for single-family homes and condos collectively was $226,500 â€“ an increase of 7% from a year earlier and the 53rd consecutive month with a year-over-year increase.
This is within a half percent of the pre-recession peak price observed in July 2005, says Daren Blomquist, senior vice president for ATTOM Data Solutions.
But looking closer at market indicators reveals further truths.
â€śThe strong national sales price numbers mask a shift in the market where we are seeing home price appreciation weaken in some previously high-flying and high-priced markets while continuing to strengthen in some of the secondary markets,â€ť says Blomquist.
Case in point: In July, home price appreciation in San Jose and San Francisco was each 5%, the former down from 16% a year earlier. San Francisco was down from a high of a 32% rate of appreciation in July 2013.
Secondary markets like Portland, Denver and Seattle, meanwhile, all experienced appreciation increases in 2016 versus one year ago.
Nela Richardson, chief economist for Redfin, agrees that bullish real estate sales prices are decelerating.
â€śAfter several years of steady and steep price growth, we are seeing indications that price growth is slowing and the market is normalizing,â€ť says Richardson. â€śRedfin housing market data indicate that home prices in August rose just 4.4% compared to 2015 -- the slowest pace of the year.â€ťClick to see today's rates (Aug 19th, 2017)
Based on these indicators, Richardson expects 2017 will bring a more normalized housing market -- one that still boasts a healthy number of sales but a moderate rate of price growth.
â€śAccording to a recent survey of Redfin agents, 54% predict prices will rise somewhat next year and 36% predict prices will level off,â€ť says Richardson.
Ask Rick Sharga, executive vice president of Ten-X (previously Auction.com), and heâ€™ll tell you that home price appreciation is likely to slow down next year, â€śalthough weâ€™re still likely to see at least a 3 to 4% year-over-year increase,â€ť he says.
â€śIn 2017, weâ€™re also projecting another modest increase in total home sales,â€ť Sharga continues. â€śHowever, three headwinds continue to challenge the housing marketâ€™s recovery -- tight credit, limited inventory, and rising prices, which are beginning to create some affordability problems in certain markets.â€ť
Blomquist anticipates home appreciation to slow nationally to approximately 5% in six months and to 3.5% in 12 months.
â€śBased on bellwether markets across the country, where sales volume has been decreasing often for several months, I would expect sales volume nationally also to slow down in 2017,â€ť says Blomquist.
â€śThat slowdown could be accelerated by rising mortgage rates,â€ť he says, â€śbut even without rising interest rates I think enough markets are now hitting affordability and inventory constraints that demand will slow down. And as demand slows, inventory will gradually increase in 2017.â€ť
Many parts of the country could see a small dip in property values over the next six to 12 months, predicts Brian Guth, regional vice president/branch manager for CrossCountry Mortgage, Inc.
â€śBut real estate, for most people, should still be thought of as a long-term hold with a great tax write-off, forced savings plan, and long-term appreciation,â€ť Guth says. â€śMy home has doubled in value since I purchased it in 2002, even though it was hit very hard in 2009.â€ť
Colby Sambrotto, president of USRealty.com, expects home sale prices to gradually increase in 2017 as more moderately priced homes ease into the market.
â€śThereâ€™s a lot of demand right now for moderately priced houses that appeal to both first-time buyers and baby boomers who want to be in a right-sized house for aging in place. Across the country, most markets donâ€™t have enough houses at or just below the median price in that market,â€ť says Sambrotto.Click to see today's rates (Aug 19th, 2017)
Considering these housing market forecasts, many professionals say itâ€™s wise for prospective home buyers to think about purchasing relatively soon.
Mortgage interest rates remain low and housing price are rising.
â€śI think itâ€™s still a great idea for first-time buyers to purchase now, because most are paying high rents and need the tax write-offs that come with owning a home,â€ť says Guth.
Richardson agrees that rental affordability is one of the biggest factors driving first-timers into the market.
â€śWith rates at historic lows, buyers may be able to find a home with a monthly mortgage payment that is less than or equal to rent,â€ť she says.
Richardson adds, â€śThe conditions that challenged first-time and millennial homebuyers this spring are starting to ease. There are fewer bidding wars and less of a need to escalate significantly above the list price to get an offer accepted. And the pace of the market is also slowing, which helps buyers since they can now afford to be more patient.â€ť
Blomquist says purchasing sooner versus later can be smart -- so long as you view the home as a long-term investment.
â€śItâ€™s probably not the best time if you are counting on your home value going up by another 20 or 30% in the next three years,â€ť says Blomquist.
He also offers a mortgage rate forecast: â€śThe rock-bottom interest rates make it a good time to be a borrower, but I donâ€™t expect interest rates to rise dramatically in 2017.â€ť
Sharga warns that trying to time the housing market can be as frustrating as trying to time the stock market.
â€śFor first-time buyers seeking a place to live and possibly raise a family, itâ€™s smart to have a long-term view on a home purchase,â€ť says Sharga. â€śIn many markets, prices are still below peak pricing from the boom years, so there are many markets across the country with excellent affordability.â€ť
Additionally, waiting for the next real estate crash and prices to go lower really isnâ€™t a good strategy -- â€śitâ€™s much more likely that home prices will continue to go up over time and that interest rates will ultimately rise,â€ť Sharga adds.
If you are still on the sidelines of the housing market, today's mortgage rates make it a good time to finally enter. Rates are low, which has maintained home affordability despite rising prices.
Check your home buying eligibility. There's no obligation to continue once you determine your qualification status.Click to see today's rates (Aug 19th, 2017)
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
Don B. Retired
The Mortgage Reports has helped me so much. I can't thank you enough.
I enjoy reading The Mortgage Reports. The articles are informative with lots of good stats and trends.
Sandi C. Customer Service Representative
The Mortgage Reports has been extremely helpful in educating me about mortgages, and what is available. Thank you for all that you do!
2017 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)