Among the trends that realtor.com is predicting for the housing market in 2017 are that millennials, which have been cited by many analysts as the key to housing growth, will dominate the market along with baby boomers and that millennials’ market share will be higher in Midwestern cities than the national average.
In fact, realtor.com's 2017 National Housing Forecast estimates that millennials and boomers will fuel demand in the housing market over the next decade, and not just for 2017. While they predict millennial market share of the total buyer pool will fall slightly to 33 percent, mostly due to rising interest rates, millennials and boomers are still predicted to dominate the market. The forecast from realtor.com calls for boomers to comprise about 30 percent of the buyer pool next year.
The affordability of Midwestern markets is expected to continue to attract millennials at a higher rate than the national average in 2017, even with interest rates rising. In 2016, millennials made up 42 percent of buyers in the Midwest, compared to the national average of 38 percent. Realtor.com reports strong affordability in 15 of the 19 largest Midwestern markets, such as Madison, Wisconsin; Columbus, Ohio; Omaha, Nebraska; Des Moines, Iowa; and Minneapolis.
Based on price appreciation and sales gains, realtor.com predicts that the top 10 housing markets overall in 2017 will be:
- Phoenix-Mesa-Scottsdale, Arizona
- Los Angeles-Long Beach-Anaheim, California
- Boston-Cambridge-Newton, Massachusetts-New Hampshire
- Sacramento-Roseville-Arden-Arcade, California
- Riverside-San Bernardino-Ontario, California
- Jacksonville, Florida
- Orlando-Kissimmee-Sanford, Florida
- Raleigh, North Carolina
- Tucson, Arizona
- Portland-Vancouver-Hillsboro, Oregon-Washington
The forecast for these 10 markets is average price appreciation of 5.8 percent (beating the anticipated national average of 3.9 percent) and sales growth of 6.3 percent (higher than the predicted national average of 1.9 percent), according to realtor.com.
While many have speculated as to what effect the new Trump Administration will have on the mortgage industry, realtor.com Chief Economist Jonathan Smoke said he does not expect the election’s outcome to directly affect the economy or the health of the housing market for the rest of 2016. One thing is certain, however—Freddie Mac reported that immediately after the election, the average 30-year FRM experienced its largest weekly increase in three-and-a-half years and is now above 4 percent for the first time in a year. The main reasons for the increased rates favor buyers, according to realtor.com—anticipation of more wage growth and economic improvements in the coming year.
“The 40 basis points increase in rates in the days following the election has caused us to increase our interest rate prediction for next year (up to 4.5 percent),” Smoke said. “With more than 95 percent of first-time home buyers dependent on financing their home purchase, and a majority of first-time buyers reporting one or more financial challenges, the uptick we’ve already seen may price some first-timers out of the market.”
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