The rise of mortgage rates and increasing home prices will influence the U.S housing market in the upcoming year. Continue reading to educate yourself about some additional factors that will also affect the market in 2017.
Mortgage Rates Will Continue To Rise
In the past few days, we have noticed the increase in mortgage rates that is projected to steadily rise over this year. As of Thursday, a 30-year fixed rate mortgage is now 4.32%, up from the October rate which was 3.47%. The nine weeks straight increase is a result of U.S Federal Reserve’s decision to reach its interest rate target in mid-December.
Federal Reserve Chair Janet Yellen said, “A rate hike could well become appropriate relatively soon if incoming data provide some further evidence of continued progress toward the committee’s objectives.” The trend of rising mortgage rates should continue in 2017 as Yellen signaled plans to hike the Fed rate target another three-time next year.
2017 Home Prices Likely Will Not Increase
According to the S&P CoreLogic Case-Shiller National Home Price Index, it indicates that the average home prices have over-balanced pre-recession levels. In October, the home price index reached 185.06, above from 134.01 in Feb 2012. The Zillow’s Home Value Index (the U.S housing market research website) indicates the similar pricing trend, with an average home value rising in December to $193,000 from an average of $151,000 in Feb 2012.
According to sources, the rising home prices are expected to slow in 2017. In 2016, Zillow index recorded the growth rate of 6.5 percent in home values but predicted that the growth rate would drop by 3.2 percent, in 2017, expecting that the average home prices will reach $198,000 by the end of next year.
Millennials Will Buy More Homes
According to the Realtor.com, millennials are buying more homes and will make a one-third of home buyers this year. Half of the home buyers are below 36 and millennials “are the most likely to have plans to move this year or next year,” indicated by the Zillow report.
Increase in Mortgages
On December 1, 2016, the FHA announced its decision to raise their loan limits in “most counties across the country” from $625,500 in 2016 to $636,150 for 2017.
Federal Housing Administration (FHA) loans are favorite for new buyers and those who have low credit scores because they offer lower down payments and also protect the lender from borrower risk of default (mortgage insurance).
Demand Exceeds Supply
According to the NAR Chief Economist Lawrence Yun post on Trulia.com, “What is needed is for homebuilders to boost construction and for investors who bought for the purpose of renting to unload those rental properties onto the market soon,” Yun wrote, adding that, since landlords enjoy such high incomes from renting, they’re unlikely to sell to permanent residents.“The only way to bring additional supply, therefore, is for homebuilders to get busy.”
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