Economic growth will be the theme of the housing market in 2017, according to the forecast from Frank Nothaft, CoreLogic senior vice president and chief economist.
And he’s not alone in these predictions. Click here to see what other economist say is in store for next year.
The economy will see growth between 2% and 2.25% in 2017 with increases in five areas, Nothaft predicted.
1. Increase in mortgage rates
Interest rates will average just over 4% next year, about 0.5% higher than in 2016, according to the forecast. Many expect the Federal Reserve to raise the federal funds target several times in 2017. This increase could affect the cost of loans tied to short-term rates, such as home equity lines of credit.
2. Vacancy rates remain low
Vacancy rates will remain low in the rental market and even decrease in the housing market, according to CoreLogic. The low level of new homes built will keep for-sale inventories low in many markets.
3. Home appreciation will continue
While home prices will continue to increase, Nothaft stated that it could continue at a slower pace. In 2017, expect to see an increase of about 5% in home prices, however some neighborhoods could even see double-digit growth while others may decline. Rent price growth is also projected to moderate at 3% in 2017.
4. Reducing incentives to refinance
With higher mortgage rates, refinance originations will drop in 2017, the forecast shows. However, this decrease will be at least partially offset by higher purchase-money volume and second liens.
5. Credit risk to stay low
New loan originations will continue to show relatively low credit risk, Nothaft stated. CoreLogic’s Housing Credit Index shows that new single-family originations during the first half of 2016 show lower risk attributes than those made 15 years ago. Next year could see heightened fraud risks, however, credit risks still look favorable overall.