Homeowners across the country have always worried about the future worth of their properties. Even if the market, statistically, was doing fantastic, Americans would still be extremely cautious making decisions regarding their homes, as they should be. Homeowners are even more cautious when the market is not doing as well. But what’s going on in the U.S. now in terms of housing?
Housing Market Outlook: Mortgage Rates
What’s in store for the national housing market for at least the rest of 2017? Well, according to Bankrate, though higher mortgage rates could spike in the first few quarters of the year, it will largely remain a seller’s market in most parts of the country.
“For those who have been contemplating a purchase, it may be as opportunistic a time as you’re going to get to lock in a rate,” said Matthew Carbray, a certified financial planner in Avon, Connecticut.
Carbray and other forecasters are predicting the current trend of mortgage rates at about 4% is here to stay. The Mortgage Bankers Association expects the 30-year fixed mortgage will average 4.3 during the first quarter and that it will average 4.2 throughout all of 2017.
The one housing change that is quite obvious to identify is that the market is opening its doors to a much younger generation. According to Realtor.com, roughly 61% of homebuyers in 2017 will be under the age of 35 years old. Also, of all prospective buyers this year, 52% are first-time homebuyers.
The Daily Reckoning expects that because a large portion of millennials is growing up, beginning careers, and starting families, they will soon be leaving their apartments and parents’ houses and buying homes of their own.
How Do Current Homeowners Feel?
Though a large portion of current homeowners is skeptical about the future of the housing market, 58% of them are expecting a bounce back.
Forbes reports that many homeowners and market officials believe that though times might be tough, there is no housing bubble currently building.
“A defining factor in a housing market bubble is home price growth that is unsustainable or unsupported,” said Nela Richardson, chief economist at brokerage Redfin. “A decade ago, the housing market was fueled by exotic mortgages and lax underwriting that allowed people to take on more debt than they could afford. What we have today is actually a very conservative and equity-driven market. We are seeing buyers in the hottest housing markets making sizable down payments, if not all-cash offers. Thus, unlike in the subprime boom, there’s equity that is supporting price growth along with good local economic drivers like job growth.”
Housing Market Under Current Administration
We’ll still have to wait and see how the next three and a half years pan out, but there will certainly be immediate changes.
Mortgage giants Fannie Mae and Freddie Mac have been sponsored by the government and under conservatorship since 2008. There has been a debate within the industry about whether or not to abolish them or privatize them. Congressional conservatives would prefer it if the current administration tackles these two mortgage giants, but those on Wall Street favor privatizing.
“Privatizing Fannie and Freddie will infuse those organizations with more capital, which will enable them to purchase greater volumes of mortgages from lenders,” added Rick Roque, president of MenloFinancial. “So that should have the effect of lowering interest rates, or at least keep them from going higher.”
How Does Construction Come Into Play?
The younger homebuyer typically has a few must-haves on his or her list for the perfect home. Traditionally, millennials have enjoyed properties in vibrant neighborhoods, modern layouts, and smart technology capabilities, but they also prefer newly built homes to already existing ones. Because of this, the U.S. construction market will likely be building more and more homes over the next few years as millennials earn enough to enter the housing market. The U.S. currently has the second largest construction market in the world, resulting in over $900 billion in expenditures.
Also, homeowners across the board are always working toward improving their properties and increasing their return on investment (ROI). Even simple bathroom additions can offer an average of 86.4% ROI for homeowners.
“The new-home industry is also benefiting from a severe shortage of existing homes for sale. Most buyer demand, however, is on the lower end of the market, where builders have trouble meeting margins,” said CNBC officials. “Construction is still running well behind even normal levels, never mind the strong, pent-up demand. Most builders are also still concentrating on the move-up market, rather than entry-level.”
As the market continues to ebb and flow, it’s important for every American, regardless of their current financial situation, to pay attention to housing trends. The Washington Post states that a large reason the market has transformed over the last few decades is because of a significant increase in the income gap.
“Things have been calm enough for long enough that we have some clarity,” added Jed Kolko, of the Housing Innovation at the University of California at Berkeley. “U.S. housing markets are more unequal today than they were before the housing bubble.”