Real Estate Trends in 2017

Real market analysts expect that the U.S. economy will show stronger signs of grow in 2017. The real estate sector may serve as the catalyst of this economic growth. The housing market represents around 15 percent of GDP. Up to date, the housing component of the economy hasn’t performed so well, because lending standards have remained tight in the wake of the real estate bubble. Developers who survived the crisis have remained cautious and reluctant to risk expanding again their operations.

According to experts, these trends will change in 2017. Here are some real estate trends expected to emerge this year:

1. More Credit Available
Due to looser lending standards, mortgage credit will likely become this year more widely available. It is expected that the Federal Housing Administration will lower fees charged from first-time homebuyers. This will continue the trend started during the Obama administration, when the first-time homebuyers’ fees were lowered in 2015. For the first time in over a decade, government-owned mortgage companies such as Freddie Mac and Fannie Mae will begin this year to back up larger mortgages. This will make it easier for buyers to finance their purchases in expensive markets.

2. Rising Rates
Since 2006, the Federal Reserve raised interest rates in December for only the second time. Most of the members of the Fed’s rate-setting board predict that in 2017 the interest rates will increase for three more times. Mortgage rates will also increase due to these decisions. For prospective homebuyers it will become more difficult to afford an expensive home. However, this trend is not making real estate market analysts worry too. The mortgage interest rates are expected to increase, but on the 30-year fixed rate they will probably be no higher than 4.3 percent.

3. More New Homes
While statistics regarding the new home constructions showed that in November last year builders pulled back on new projects, the overall trend remains clearly positive. In the year 2016, the average annual rate of new buildings reaching a 1.163 million rate. From 1.108 million in 2015, this figure is up around 5 percent. As home builders are encouraged by looser credit, higher wages, and increased buyer demand, this trend will continue in 2017.

4. Foreign Buyers Stay On The U.S. Market
In places like Los Angeles and New York, one trend that drives prices beyond affordability is the influx of foreign buyers. The number of affluent foreign buyers of U.S. real estate has increased lately. This trend is fueled in particular by Chinese buyers. They are driven away by repressive policies and slowing economy in their homeland and looking for safe places to store their wealth. Europe and the U.S. continue to attract Asian investors and growing amounts of foreign capital.

5. Medium-sized Cities Rise
Among the dominant trends of the current economic recovery is rise of medium sized cities. As workers come to these locations looking to take advantage of the employment market characterized by high-paying jobs, top-tier economic cities like San Francisco, Seattle and New York have seen property values rise. Those cities’ real estate markets are experiencing difficulties, because new construction cannot keep pace with demand due to local government regulations or geographic constraints. This makes the younger folks attracted to medium-sized cities that provide housing affordability. For instance, during the past six years, cities like Fort Collins, Colo. and Raleigh, N.C. have seen a booming in building permit issuance. This trend is expected to continue in 2017.