Realtor.com’s freshly minted predictions for 2017 are out, revealing a year that won’t look too different from 2016. However, the forecast does highlight a potential risk that could significantly impact first-time homebuyers.
Millennials, which usually fall into the first-time homebuyer pool, are predicted to start moving into the housing market soon as they opt out of renting. Unfortunately, this forecast report states that what was once a great time to buy for young buyers, is turning into a time filled with a lot of roadblocks.
The website adjusted its prediction for next year right up to the wire in order to take in account President-elect Donald Trump.
As a whole, Jonathan Smoke, chief economist for realtor.com, said they don’t expect the outcome of the election to have a direct impact on the health of the housing market or economy as we close out 2016.
“However, 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,” said Smoke. “With more than 95% 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.”
Looking at the latest Freddie Mac Primary Mortgage Market Survey, the 30-year fixed-rate mortgage is finally above the 4% threshold.
As a result, realtor.com needed to change its original positive forecast for first-time homebuyers in 2017. Instead, realtor.com predicts first timers will face new hurdles as they navigate the qualification and buying process.
First-time homebuyers already struggle finding affordable inventory and now higher rates will make it harder to qualify for a mortgage.
The changes fueled realtor.com’s estimate that the 2017 housing market will be a year of slowing, yet moderate growth.
Other key predictions for next year include:
- Home prices are anticipated to increase 3.9%
- Existing home sales are forecasted to increase 1.9% to 5.46 million homes.
- Interest rates are expected to reach 4.5%
- The homeownership rate will stabilize at 63.5%
- New home sales are expected to grow 10%
- New home starts are expected to increase 3%
The reported added that the forecast is based on GDP growth of 2.1%, a 2.5 %increase in the consumer price index and unemployment declining to 4.7% by the end of the year.