As with any kind of asset, the investors who are able to predict upcoming fluctuations in the property market are the ones who will make the most money from it. In the wake of November’s election, foreseeing the future of real estate markets has become extremely hard. However, with the Trump administration gaining traction and turning more rhetoric into policy, there are a few clear things we can expect to see over the next year…
Affordability Pressures Mean Slower Growth
In some of the US’s largest cities, the availability of homes that are considered affordable on an average income has declined over the past few years. There isn’t much to suggest that the remainder of 2017 will turn this around, either. Inventory is expected to recover slightly; around 1.7% year over year, having fallen by roughly 3.4% over the course of 2016. Home sale prices are also likely to increase over the next few months, and existing home sales are likely to creep up, after rising 3.4% over 2016.
The Fastest Real Estate Market on Record
You may be wondering what makes a given country’s real estate market “fast”. This is a measure of the average number of days a home will spend up on the market before entering into a contract. In 2016, the average residential property stayed on the market for a mere 52 days, the shortest figure recorded since 2009, just after the recession hit. There’s been a major property inventory crisis in the US for the past three years, especially when you look at starter homes, which are sparse all across the country. In some areas, like Denver, the average time a home spends on the market is a minuscule 6 days!
Rates Will Increase, But Only a Little
Over the course of 2017, experts predict that rates on a 30-year fixed mortgage will climb to roughly 4.3%. Since the end of October 2016, the 30-year fixed mortgage rate has gone from 3.5% to just above 4%. This considerable bump has been mainly down to a general optimism on Wall Street towards the Trump administration’s economic policies, along with the Federal Reserve’s interest rate hike which occurred in December last year.
The Housing Shortage Isn’t Going Away
Perhaps the most important prediction to take away from this article is the persistent shortage of affordable housing in America. This has been influenced by a number of other factors that are popping up in popular financial journals; mortgage rate increases, a slump in construction, and so on. Unfortunately for many millennials who are well into their twenties, there doesn’t seem to be anything on the horizon which will bring any improvement or relief to the issue. There simply aren’t enough homes being built in relation to the continuing growth of the population. This could lead to some major social discontent, as millions will continue to be affected by the shortage, while construction of new property remains slow.
If you’re planning any major moves in your real estate portfolio, be sure to keep these things in mind.