The 2017 housing market will be a year of slowing, yet moderate growth, set against the backdrop of a changing composition of home buyers and a post-election interest rate jump that could potentially price some first-timers out of the market, according to the realtor.com® 2017 housing forecast released today.

The report also predicts the top five housing trends of 2017, as well as home prices and sales for the 100 largest metros in the U.S.

2017 National Housing Forecast
The 2017 national real estate market is predicted to slow compared to the last two years, across the majority of economic indicators. Home prices are anticipated to increase 3.9 percent and existing home sales are forecasted to increase 1.9 percent to 5.46 million homes. Interest rates are expected to reach 4.5 percent due to higher expectations for inflationary pressure in the year ahead.

Realtor.com® is forecasting the homeownership rate will stabilize at 63.5 percent after bottoming at 62.9 percent in 2016. New home sales are expected to grow 10 percent, while new home starts are expected to increase 3 percent. The forecast is based on GDP growth of 2.1 percent, a 2.5 percent increase in the consumer price index and unemployment declining to 4.7 percent by the end of the year.

Prior to this month’s election, demographics and an improving economy were laying the foundation for a substantial increase in first-time buyers in 2017, but due to mortgage rate increases over the last few weeks realtor.com® predicts first timers will face new hurdles as they navigate the qualification and buying process. These higher rates are associated with anticipation of stronger economic and wage growth next year, both of which favor buyers. However, higher rates will make qualifying for a mortgage and finding affordable inventory more challenging.

“We 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 Jonathan Smoke, chief economist for realtor.com®. “With more than 95 percent 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.”

Top Housing Trends for 2017
Next year’s predicted slowing price and sales growth, increasing interest rates and changing buyer demographics are setting the stage for five key housing trends:

1. Millennials and boomers will dominate the market –– Next year, the housing market will be in the middle of two massive demographic waves, millennials and baby boomers – that will power demand for at least the next 10 years. Although increasing interest rates have prompted realtor.com® to lower its prediction of millennial market share to 33 percent of the buyer pool; millennials and baby boomers will still comprise the majority of the market. Baby boomers are expected to make up 30 percent of buyers in 2017 and given they’re less dependent on financing, they are anticipated to be more successful when it comes to closing.

2. Midwestern cities will continue to be hotbeds for millennials – Midwestern cities are anticipated to continue to beat the national average in millennial purchase market share in 2017 with Madison, Wis.; Columbus, Ohio; Omaha, Neb.; Des Moines, Iowa; and Minneapolis, leading the pack. This year, average millennial market share in these markets is 42 percent, far higher than the U.S. average of 38 percent. With strong affordability in 15 of the 19 largest Midwestern markets, realtor.com® expects this trend to continue in 2017 even as interest rates increase.

3. Slowing price appreciation – Nationally, home prices are forecast to slow to 3.9 percent growth year over year, from an estimated 4.9 percent in 2016. Of the top 100 largest metros in the country, 26 markets are expected to see price acceleration of 1 percent point or more with Greensboro-High Point, N.C.; Akron, Ohio; and Baltimore-Columbia-Towson, Md., experiencing the largest gains. Likewise, 46 markets are expected to see a slowdown in price growth of 1 percent or more with Lakeland-Winter Haven, Fla., Durham-Chapel Hill, N.C.; and Jackson, Miss., undergoing the biggest shift to slower price appreciation.

4. Fewer homes on the market and fast moving markets – Inventory is currently down an average of 11 percent in the top 100 metros in the U.S. The conditions that are limiting home supply are not expected to change in 2017. Median age of inventory is currently 68 days in the top 100 metros, which is 14 percent – or 11 days – faster than U.S. overall.

5. Western cities will continue to lead the nation in prices and sales – Western metros in the U.S. are forecast to see a price increase of 5.8 percent and sales increase of 4.7 percent, much higher than the U.S. overall. These markets also dominate the ranking of the realtor.com® 2017 top housing markets, making up five of the top 10 markets on the list (Los Angeles, Sacramento and Riverside, Calif., Tucson, Ariz., and Portland, Ore.) and 11 of the top 25 (Colorado Springs, Colo.; San Diego; Salt Lake City; Provo-Orem, Utah; Seattle. and Oxnard-Thousand Oaks-Ventura, Calif.)

Top 2017 Housing Markets
Despite a more moderate housing market overall in 2017, strong local economies and population growth will continue to fuel the nation’s hottest markets. The realtor.com® 2017 top 10 housing markets based on price and sales gains are: 1. Phoenix-Mesa-Scottsdale, Ariz.; 2. Los Angeles-Long Beach-Anaheim, Calif.; 3. Boston-Cambridge-Newton, Mass.-N.H.; 4. Sacramento–Roseville–Arden-Arcade, Calif.; 5. Riverside-San Bernardino-Ontario, Calif.; 6. Jacksonville, Fla.; 7. Orlando-Kissimmee-Sanford, Fla.; 8. Raleigh, N.C.; 9. Tucson, Ariz.; and 10. Portland-Vancouver-Hillsboro, Ore.-Wash.

These top 10 markets are forecast to see average price gains of 5.8 percent and sales growth of 6.3 percent, exceeding next year’s anticipated national growth of 3.9 percent and 1.9 percent, respectively. But when compared to last year, prices in eight of the top 10 markets are expected to decelerate with only Los Angeles and Tucson, Ariz. showing stronger growth than last year. Other commonalities among the top 10 housing markets include: relatively affordable rental prices, low unemployment, large populations of millennials and baby boomers, as well as a high number of listing views on realtor.com®.

See Table 1 for the ranking of the top 100 largest metros in the U.S., as well as their price and sales forecasts.

Table 1: Realtor.com^®’s 2017 Housing Forecast – Top 100 Metros

SOURCE: http://research.realtor.com/2017-national-housing-forecast/

1. Renewed Confidence to Drive CRE Strategy
Property values are approaching 2008 levels, but this time it’s not a false bubble. The market is not overleveraged, and the fundamentals are stronger. A feeling of renewed confidence is driving how investors are approaching their strategic planning for 2017. The anticipated lifting of regulatory barriers and the lowering of tax rates should trigger CRE growth in sectors ranging from multifamily housing to hospitality to industrial. Interest rates will inevitably rise, but the industry as a whole seems well-poised to absorb any adverse impact.

2. The Role of REITs
We’re seeing the reshaping of various REITs to be more laser focused on a particular geography or segment in the market. While there’s some hesitation with development activities, we’re seeing publicly traded REITs partner with best-in-class developers—who are taking a substantial amount of the development risk—and these REITs are getting in early, at a lower price point.

We expect to see growing activity among nontraded REITs, the crowdfunded or so-called e-REITs, which are structuring lower fees, building in liquidity mechanisms, and attracting a new class of nonaccredited investors.

3. Multifaceted Multifamily
While some are still waiting for the bubble to burst, we expect the demand for multifamily housing to continue expanding in the next year, across multidemographic lines, particularly for the large millennial and boomer generations, and in both student and senior housing, as developers work to meet the increasingly sophisticated expectations of this residential market sector.

4. The Retail–Logistics Link
Advanced warehouse and distribution facilities will be expanding CRE segments nationwide, addressing the growing logistical demands of a retail economy shifting to e-commerce. But as developers and investors look to smooth the “last mile” in the delivery chain, they likely will be turning their attention to building and strategically placing micro-distribution centers, which could find homes in repurposed big-box store spaces.

5. Urban Density Dynamics
We expect to see urban densification continue to trend upward in 2017, especially in the development of high-density and mixed-use centers, such as the West Loop in Chicago, that offer luxury living, retail, work, and entertainment spaces, along with parks and other common areas. Suburban communities with good mass-transit connections will try to mirror this urban rebirth with a live–work–play mix of residences, retail, and lifestyle amenities on a walkable scale.

6. Global Volatility and Foreign Investors
Historically, the U.S. commercial real estate market has been seen as a safe harbor in volatile times, and FIRPTA (Foreign Investment in Real Property Tax Act) reform has opened new sources of foreign investment. In 2017, we see foreign investors looking beyond Class A properties in top-tier cities to find value in rising urban areas nationwide. We’re watching Chinese investors closely, sensing a perception by some that U.S. prices may have gotten too high and with Beijing planning to tighten rules on investment capital leaving the country.

7. Headwinds, Tailwinds … and Crosswinds
From China’s slowing economy to the inevitability of rising interest rates, commercial real estate will face headwinds in 2017. But there are tailwinds, too, propelling surging sectors, from student housing to logistics spaces, and in the way millennials and baby boomers are fueling new development in rising urban areas.

CRE may be buffeted by hard-to-gauge crosswinds, though, as the dust settles from Brexit and the U.S. presidential elections, and as uncertainly swirls around the status of government regulations, critical tax policies, and other key directions of the new administration and the new Congress.

With additional issues such as looming debt maturities and opportunities for recapitalizations and distressed purchases as a result of the maturities, 2017 promises to be a news-making year in CRE.

SOURCE: http://www.multifamilyexecutive.com/business-finance/7-trends-driving-commercial-real-estate-in-2017_o

Of course, a lot depends on the actions of the new administration. Although President-elect Donald Trump said little about housing during the campaign, some of the issues he highlighted will have an effect on the residential real estate market, such as infrastructure spending, regulatory and tax reform, and immigration policies.

[Mortgage rates move higher for the seventh week in a row]

Below is a roundup of what the experts say buyers, sellers and renters can expect in 2017:

Realtor.com predicts “a year of slowing, yet moderate growth.” The listing service for the National Association of Realtors compiled five housing trends for 2017:

Millennials and boomers will dominate the market. Realtor.com expects these two massive demographic groups to power demand for the next decade.

Midwestern cities will continue to be hotbeds for millennials. According to Realtor.com, millennials are clamoring to live in Madison, Wis.; Columbus, Ohio; Omaha; Des Moines; and Minneapolis.

Slowing price appreciation. Realtor.com forecasts home prices will grow at 3.9 percent annually, compared to an estimated 4.9 percent in 2016.

Fewer homes on the market and fast-moving markets. Inventory is down an average 11 percent in the top 100 metro markets, and it is not expected to improve next year. Homes are selling 14 percent faster.

Western cities will continue to lead the nation in prices and sales. Realtor.com predicts prices to increase 5.8 percent and sales to increase 4.7 percent in this region.

[More homes sold in the D.C. area last month than any November in the past seven years]

One prediction you can always count on: No matter what’s happening with the economy, NAR is always going to say it’s a great time to buy. Its fourth quarter Housing Opportunities and Market Experience surveyfound that 70 percent of people say now is a good time to buy a home. NAR also predicts the rate on a 30-year fixed mortgage will rise to 4.6 percent by the end of 2017.

Zillow says the homeownership rate will bounce back even as renting becomes more affordable. The real estate data firm also sees a reversal of a recent trend, predicting that “more Americans will drive in from the affordable suburbs for work, despite urban development efforts.” Its seven predictions are:

Cities will focus on denser development.

More millennials will become homeowners.

Rental affordability will improve.

Buyers of newly built homes will have to spend more to cover rising costs of construction.

The percentage of people who drive to work will rise for the first time in a decade as homeowners move farther into the suburbs seeking affordable housing.

Home values will grow 3.6 percent.

“Those looking for more affordable housing options will be pushed to areas farther away from good transit options, in turn leading more Americans to drive to work,” said Svenja Gudell, Zillow chief economist. “Renters should have an easier time in 2017. Income growth and slowing rent appreciation will combine to make renting more affordable than it has been for the past two years.”

Redfin predicts “strong buyer interest, better access to credit and a modest and much needed increase in inventory will allow home sales to grow but not as much in 2016.” The national real estate brokerage madesix predictions:

The housing market will continue to grow but at a slower pace. Redfin expects median home sale prices to rise 5.3 percent annually in 2017 compared to 5.5 percent this year and existing home sales to increase 2.8 percent annually in 2017 compared to 3.4 percent last year. Although Redfin predicts inventory will be up slightly, it noted that “because we haven’t seen any increase in supply in the most affordable third of the housing market in more than eight months, we expect most of next year’s increase to be in the most expensive third of the market.”

2017 will be the fastest real estate market on record. Homes stayed on the market an average of 52 days this year, according to Redfin. It expects them to sell even faster in 2017.

New-construction growth will slow. Construction is “much lower than historical averages due largely to labor shortages. Given that nearly one in four construction workers are foreign-born, stricter immigration policies from the Trump administration are likely to make the problem worse.”

Mortgage rates will increase but not too much. Redfin expects mortgage rates to rise but no higher than 4.3 percent on the 30-year fixed rate next year.

More people will have access to home loans. Next year, Fannie Mae and Freddie Mac will raise its loan limits for the first time since 2006, increasing them to $424,100 for most of the country and to $636,150 for more expensive markets. “This change makes it easier for more homebuyers to qualify for a mortgage in high-priced markets,” Redfin said.

Millennials will move to second tier-cities. According to Redfin, among the places millennials are looking to buy are Raleigh, N.C.; Austin; and North Port, Fla.

The Mortgage Bankers Association predicts mortgage rates will rise slightly but remain low, purchase applications will increase and refinance applications will decrease.

“Strong household formation coupled with further job growth, rising wages and continuing home price appreciation will drive strong growth in purchase originations in the coming years,” said Mike Fratantoni, MBA’s chief economist.

MBA expects rates on the 30-year fixed rate mortgage to remain below 5 percent through the end of 2018.

“Historically low and, in some cases, negative rates around the world continue to put downward pressure on long-term U.S. [bond] rates, keeping them lower than the domestic growth environment would otherwise warrant,” Fratantoni said.

Many times over the past few years the refinance boom has been declared over only to have world events conspire to revive it. Although he adds a caveat to his expectation, Fratantoni said he expects fewer refinances in the coming year.

“The world is an uncertain place, and there is always a chance that rates could drop again in response to global turmoil,” Fratantoni said. “But we expect that refinance volume will most likely be much lower over the next few years as homeowners have repeatedly had the opportunity to lower their rates, and there will be fewer households with an incentive to refinance if rates follow the path we are projecting.”

SOURCE: https://www.washingtonpost.com/news/where-we-live/wp/2016/12/19/2017-housing-market-forecasts-suburbs-are-in-low-mortgage-rates-are-out/

• Several markets with favorable supply-and-demand balances and momentum in hiring made large moves to ascend to the top spots in the 2017 National Multifamily Index (NMI).
• Los Angeles advanced 11 places in the Index from one year ago to take the highest position in 2017 behind a forecast for further tightening in vacancy and minimal supply growth. Robust job growth propelled the seven-rung rise of Seattle-Tacoma (#2) and Boston (#3) also executed an advance of seven places on its strong job market.
• Minneapolis-St. Paul (#4) is the highest-ranked Midwest metro this year. San Francisco (#7) and San Jose (#8) were downgraded from the top of last year’s NMI as their growth cycles mature, and New York City also declined to the last spot in the top 10.

National Economy

• Economic performance in 2017 could benefit from the carryover of last year’s momentum. The uncertainty regarding fiscal, trade and other policy goals not yet formulated by the incoming administration could generate a drag on economic growth in the first months of the Trump term.
• The ability of the new administration and Congress to work together was a matter of speculation at the end of last year. Promises of infrastructure spending could find some bipartisan agreement in the coming year, but implementation of a plan could necessitate additional government borrowing.
• The economy added approximately 2.2 million jobs in 2016 but the reduction in labor market slack will support 2.0 million new hires this year. An increase in consumer spending, combined with the possible implementation of fiscal policies, should generate GDP growth in the 2.5 percent range during 2017.

National Apartment Overview

• Projected job creation and rental household formation will support demand, while demographic trends also support low vacancy and a steady pace of rent increases. Notably, the ongoing flow of millennials into the workforce, a segment of the population with a high propensity to rent, represents a robust driver of growth in the multifamily sector.
• Developers will bring 371,000 units to the market in 2017. In addition to disciplined construction lending, proposals of increased government infrastructure spending could elevate competition for construction materials and labor needed for multifamily construction.
• National apartment vacancy will end 2017 at 4.0 percent as rapidly increasing household formation generates robust net absorption that supports a 3.8 percent rise in the average effective rent. Class A vacancy rates will climb in many markets where substantial supply influxes are on tap.

Capital Markets

• Lending capacity for multifamily acquisitions and refinancing remains healthy, but the rise in the yield on the 10-year U.S. Treasury following the election creates some uncertainty concerning where long-term rates will settle.
• Higher interest rates and tighter lender underwriting could cultivate additional investor caution. However, a potential easing of DoddFrank regulations on financial institutions could create additional lending capacity for other capital sources.

Investment Outlook

• The rise in the average sales price during 2016 maintained the average cap rate in the low-5 percent range and prompted many investors to search for higher yields in secondary and tertiary markets.
• Investors remain cautiously optimistic. However, speculation on how a new presidential administration will govern is certain to influence investors’ outlooks temporarily, at least through the early months of a Trump presidency.

SOURCE: https://www.marcusmillichap.com/research/researchreports/reports/2017/01/17/multifamily-investment-forecast

Since Election Day pegged Donald Trump as the new president elect – a man notorious for making billions in real estate – mortgage rates shot up over a half percent, creating wariness for homebuyers and sellers alike on the short and long-term effects of the new administration on the real estate market.

While the economy is sure to experience some turbulence through the transition into the new administration, the 2017 real estate market should be spurred by loosening of lending practices, increasing equity for homeowners and growth in new home construction.

Interest Rates

2016 has been another historic year for mortgage rates as they hovered around 3.5 to 3.875 percent for the first 10 months of the year. While interest rates have fluctuated up and down over the past few years, it’s been five years since we saw interest rates over 5 percent.

You may be under the impression interest rates are a direct result of the rate set by the Fed, but that’s not the case. In fact, the Fed rate and mortgage interest rates have differed between .5 and over 5 percent throughout the past 20 years, according to MortgageReports.com.

[See: 7 Things Rising Interest Rates Mean for Homebuyers .]

The rise in mortgage rates last month was a direct response to Trump’s election. Throughout his campaign, Trump promoted an increase of billions of dollars in infrastructure spending. Investors recognized this will drive up the cost of goods and inflation, thus leading to an increase in the bond market and mortgage rates.

Following the housing bubble and its subsequent burst in the mid-2000s, the recession of 2008 triggered a decrease in all interest rates in an effort to jump-start a very weak economy. We may never see rates this low again, but no one knows. That said, should rates fall to such low levels again it would likely be due to a reaction from a weakened economy – something none of us want for ourselves or our country to endure again.

2017: Trump has promoted an overhaul of U.S. infrastructure and with that, mortgage rates have begun climbing in anticipation of a rise in inflation. While it is unlikely we will see a continued increase of major proportions, buyers should be prepared to see rates in the mid-4 percent range during 2017. Currently, the National Association of Realtors projects interest rates at 4.4 percent in the fourth quarter of 2017.

Another interesting twist could come from what happens with the leadership of the Federal Reserve. Rumors have been swirling about whether Federal Reserve Board Chair Janet Yellen may resign once Trump enters office, or if the president-elect may even try to force her out. Should that happen, it could cause a negative ripple effect throughout the economy as long-term speculation would become foggy.

Home Values

Home values have continually risen since reaching a low point in December 2011. Real Estate information company Zillow reports home values have increased 6.2 percent over the past year with the national median home value at $191,200. This is still less than the April 2007 high of $196,000, but a slow and consistent increase in home values is in line with historic appreciation trends.

2017: The coming year should finally see a return to a historically normal growth rate in the real estate market. The past 12 years have been a roller coaster of highs and lows, jump-starts and slow-downs – rising rates and low inventory will slow 2016’s momentum, but will not stop it. Both Zillow and the NAR predict home values to increase 3 percent in 2017.

Uncertainty about the next White House administration, mixed with typical seasonal slowdowns for much of the country, could further a lack of inventory on the market as sellers wait for a high-demand scenario.

If Trump can create clarity and some stability in the real estate market and economy as a whole in his first six months in office, buyers and sellers sitting on the fence will have enough confidence to jump into the market and continue to drive values higher.

Dodd-Frank

In 2010, the Obama administration enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act. The primary impact it had on the real estate market was through the creation of the Consumer Financial Protection Bureau, which oversees many reforms including protecting buyers from predatory lenders.

While some aspects of Dodd-Frank are vital to the protection of mortgage borrowers, many are overkill. A typical transaction involving a conventional loan once took an average of 30 days, but the norm is now 45 days.

[Read: A Homebuyer’s Guide to Federal Policy on Mortgage Lending .]

2017: Leading up to Obama’s first term in office, real estate was a hot topic during the campaigns. Real estate reform has taken a back seat leading up to Trump’s election, but he’s made it clear he aims to wipe out a lot of red tape.

While many have suggested Trump will repeal Dodd-Frank, it’s much more likely he’ll aim to cut out the unnecessary fat while allowing the general principles of borrower protection and lender transparency to remain. Despite the arguments over the pros and cons of Dodd-Frank, the true benefit lies in its far-reaching measure for the past six years. This will give lawmakers empirical data to analyze should they decide any paring down is necessary.

Housing Starts

Following the real estate bubble burst, housing starts ground to a halt. According to the National Association of Home Builders, housing starts have climbed from a total of 784,000 in 2012 to a projected level of 1.162 million in 2016. But the nation still faces an inventory shortage which must be remedied.

According to the 2016 NAR Profile of Home Buyers and Sellers, first-time homebuyers, who make up 35 percent of the market, pay a national median price of $182,500. This is far below the Census Bureau’s reported median sales price of new homes for October 2016 of $304,500. For homebuilders to be able to sell to a higher-price clientele, those individuals need to sell their existing homes, which over the last few years have finally started gaining positive equity.

2017: The NAHB currently estimates it will have 1.242 million housing starts in 2017, continuing its upward trend over the past five years. While home prices are not expected to make any major jumps, they will continue their upward trend, continuing to cater to repeat buyers.

[Read: Buying a Home in 2017? 4 Strategies to Keep Your Purchase Affordable .]

Bottom Line

Our national housing situation is the sum total of hundreds of thousands of individual real estate transactions spanning a vast spectrum of local real estate markets. It’s important to follow national trends and stories as they have a trickle-down effect, but it is imperative you examine your specific situation and surrounding area to find the best opportunity.

Here is what it boils down to: The loosening of lending standards, expanding new home starts, increased equity and home values, and historically low mortgage rates will continue to fuel the real estate market throughout 2017. Optimism in the face of uncertainty may not always run hand-in-hand with reality, but today’s fears will be allayed by tomorrow’s victories.

SOURCE: http://realestate.usnews.com/real-estate/articles/what-to-expect-for-the-2017-housing-market/

Nevertheless, Gudell and others argue that on balance 2016 was a pretty good year for housing. National prices finally crossing the previous 2006 peak, mortgage rates remained historically low and there were some signs that Millennials, a generation which some feared would never buy homes, are beginning to enter the market. Through it all the election loomed large. In 2017 we’ll see how profound it’s effects.

Here are eight things housing experts expect to see in 2017:

1. Prices will continue to rise–but more slowly. 

Prices rose every month last year (through October) with the largest gains coming in the later half and a 5.61% increase in national. Experts expect prices will continue their climb, but gains will slow. “We believe price increases will hold steady despite slowing sales growth, because homebuyer demand is stronger now than it was at the same time last year, and because we foresee a small uptick in homes for sale,” notes Nela Richardson, chief economist at real estate brokerage Redfin.

“With the current high consumer confidence numbers and low unemployment rate, affordability trends do not suggest an immediate reversal in home price trends,” noted David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, in the December release of the Case-Shiller home price index. “Nevertheless, home prices cannot rise faster than incomes and inflation indefinitely.”

Redfin expects the median home sale prices to gain 5.3% in 2017 compared to 2016, which would not be a major change from the 5.5% year-over-year gain expected to close out this year. Zillow is forecasting the median home value to rise 3.2% from $192,500 between November 2016 to November 2017. Zillow’s home value index rose 6.5% in the year ending November 30th.

2. Affordability will worsen. 

Wages are expected to grow in America’s big cities this year, but the share of homes affordable to someone earning the median income is not. This trend, which has stymied many aspiring to buy their first home over the past few years, will be intensified by a continued shortage in low- to moderate-priced inventory and rising mortgage rates. “The irony of the modern housing market is that the places where we are seeing wage growth are places where people can’t live because they are too un-affordable. There is a mismatch,” says Nela Richardson, chief economist at real estate brokerage Redfin.

A decade ago a mismatch like this would not have been so apparent because buyers could get subprime loans, but now high credit is a requirement. The percent of new listings in the lowest price tier of the market has declined nearly every month in the last five years. Experts agree that even if builders are more active this year, they are unlikely to significantly add to the starter home stock in 2017.

3. Mortgage rates will be volatile. 

The two major political events of 2016 set mortgage rates moving in opposite directions. In June, the British vote to exit the European Union put rates near a record low. In November, the U.S. election of Donald Trump had the opposite effect, sending rates above 4% for the first time in two years. By historic standards rates are still low. In 2017 experts expect movement, but differ on where for the 30-year fixed rate will land. Estimates out there range from between 3.75% and 4.6%–not so far from where it is today.

“Mortgage rates going up is a bit of euphoria and optimism over [Trump’s] promise to lower taxes, increase infrastructure spending and drive 4% econ growth,” says Richardson. “As more details materialize and we get a realistic assessment, we will see rates bump around.” Notes Gudell: “If you squint at line you will see nice upward trend, but it will happen at a volatile pace.”

In December the Federal Reserve bumped short term interest rates o between 0.50% and 0.75%, the second hike in a decade. The 25 basis point move left rates low by historic standards and on did not have a huge impact on mortgage rates. However, the Fed’s policy makers indicated they anticipate three hikes in 2017, which could have a larger effect. That’s up from the two officials projected before Donald Trump was elected. That said, Fed projections can be taken with a grain of salt: they also originally thought they would hike three times in 2016.

4. Credit availability will improve–maybe. 

By and large early Trump administration priorities are not expected to deal directly with housing. However, the president-elect and his team have made it clear that they hope to roll back much of the post-crisis financial regulation laid out in the Dodd-Frank Act. In theory, this could open up banks to lend more freely to wide-range of would be buyers. Though not everyone is convinced this type of lending is the direction banks would go with any new found freedom. Meanwhile, there is speculation that Trump would return government-controlled mortgage companies Fannie Mae and Freddie Mac to private control. Investors have cheered the possibility, but some housing economists worry such a move would further restrict who could get credit to buy a home.

5. Supply will improve but remain short. 

Declining inventory was without a doubt the defining feature of the housing market in 2016. It led to price appreciation, as well as a hyper fast market for buyers and discouraged would-be-sellers who feared entering the buying fray. A complete turnaround is unlikely in 2017, but there are some signs the coming year could see a small bump in housing supply–at least on the new home front.

Homebuilder sentiment picked up late last year, as many expect Trump to be a friend to the industry. Meanwhile, strong demand should also encourage building. “Controlling for the number of households in the U.S., housing starts are still only 55% of the 50-year average,” wrote Trulia Chief Economist Ralph McLaughlin. “The historical view looks like there’s also more room for housing starts to grow.” Construction, however, is unlikely to improve the affordability picture because there is a growing premium for new homes and most building in recent years has been on the high-end, since builders feel they can get a better return there.

When it comes to existing homes a phenomenon Richardson calls “rate lock” may constrain inventory. Homeowners who locked in a mortgage below 4% are likely to stay in low priced homes rather than upgrade, a pattern that last emerged when rates briefly rose in 2013.

6. More Millennials will become homeowners–and renters. 

According to Zillow half of all buyers are under age 36. Not every economist agrees with this assessment, however it is clear that Millennials will continue to make up a large and growing portion of the buyer pool. Of course much of this is due to the fact that Millennials–adults born after 1980–are now the largest adult generation and make up the greatest percentage of the workforce. Redfin expects Millennial homebuyers will move from the coasts to “inland markets” where starter homes are more affordable.

7. Competition will grow fiercer.

In 2017 sellers will maintain the edge over buyers as demand is expected to increase. In 2016 the typical homes stayed on the market for just 52 days, about a week faster than in 2015 and the fastest year since Redfin began measuring in 2009. The brokerage expects 2017 to be even faster.

8. Political uncertainty will be replaced with policy uncertainty. 

Experts agree that three of President-Elect Donald Trump’s policy priorities could meaningfully impact the housing market: his pledges to spend more on infrastructure, to cut taxes and to crack down on immigration. The consensus is that in the very short term any moves in these three ares could have a neutral-to-positive impact on the housing market. Over the longer term, however, opinions vary widely. For more on that debate read: How President Trump Could Affect The Value Of Your Home.

Source: https://www.forbes.com/sites/samanthasharf/2017/01/03/housing-outlook-2017-eight-predictions-from-the-experts/

The multifamily market has enjoyed several years of rapid growth and seems poised to continue to grow in 2017, although at a more moderate pace.

• Slow-but-steady economic growth continued in 2016, which supported strong demand for multifamily rental units. Despite high levels of construction permits and starts, vacancy rates remained flat, while strong demand pushed up rents and gross-income growth above the historical norm.
• A greater amount of new supply will be delivered to the market in 2017 but most of it will be absorbed, given continued economic growth and strong multifamily fundamentals. Vacancy rates will increase slightly, but still leave room for rent and gross-income growth.
• The top 10 list of fastest-growing metropolitan areas will see some jockeying for position in 2017, with smaller, more affordable markets making a showing.

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2016 in Review: Another Strong Performance

The multifamily market continued its above-average performance in 2016, in line with most expectations but with some surprises at the metro level. New supply entering the market kept pace with demand as vacancy rates remained flat over the year, as reported by REIS. While expectations for vacancy rates to increase in 2016 did not come to fruition, anticipated moderation in rent growth did take place. Despite the moderation, rent growth remained above the historical average in 2016. Several of the larger metro areas experienced more pronounced slowing than the broader market, such as San Francisco and New York City. Although most metros saw rent growth moderation in the past year, the majority continued to perform above their pre-recession averages.

Economic growth continued to support strong multifamily fundamentals. The labor market improved in 2016 but progress was slower than in previous years. The economy added 2.2 million jobs in 2016 – more than the historical average, but considerably fewer than the 3 million and 2.7 million jobs added in 2014 and 2015, respectively. The labor force participation rate was 62.7 percent as of December 2016, which is only marginally higher than a year prior and lower than the post-recession average of 63.6 percent.

With oil prices tumbling in the beginning of 2016, down to $27 per barrel, and a strong dollar keeping U.S.

exports suppressed, employment tied to these sectors, as well as areas of the country that rely heavily on these industries, saw slower growth throughout 2016. The manufacturing sector contracted in 2016 with a growth rate of -0.4 percent. Since May 2016, oil prices have been between $40-$50 per barrel, indicating that prices may finally be stabilizing. Fortunately, not all sectors experienced such poor performance; construction slowed in 2016 but still recorded annual growth of 1.6 percent. Education and health services along with professional and business services grew the most with year-over-year increases of 2.7 percent and 2.6 percent, respectively.

Average hourly earnings rose 2.9 percent over the past year – the largest annual gain since 2008. The strengthening wage growth is a welcome sign by many since it’s the last major piece of the labor market to recover. Meanwhile, the unemployment rate continued its downward trend. It ended the year at 4.7 percent, down 30 basis points (bps) from the prior year but up from the cyclical low of 4.6 percent in November 2016. Overall, the Federal Reserve judged the labor market to be healthy and cited the recent employment gains as justification for a federal funds rate increase this past December.

Strong labor markets encouraged more household formations in 2016, as shown in Exhibit 1. Through the third quarter, 1.2 million new households were formed– more than the post-recession average of 850,000 per year. Of them, a larger share – 630,000 – rented their homes, keeping demand for rental units at historical highs, largely due to demographic shifts and lifestyle preferences. But the 590,000 new owner-occupied households represent the largest year-over-year gain in 10 years. The homeownership rate at the end of the third quarter of 2016 was 63.5 percent, down 20 bps from the prior year but up 60 bps from the prior quarter.  Exhibit 1: Multifamily Starts and Completions (5+ Units) and Renter Households

Sources: Freddie Mac, U.S. Census Bureau, Moody’s Analytics

To keep up with the rise in renter households, multifamily construction has reached the highest levels since the late 1980s, when tax-code changes spurred the market. Shown in Exhibit 1, multifamily permits and starts have stopped – or paused – their upward trajectory. Permits dropped around 13 percent over the year while starts were down 3 percent. Multifamily completions nudged slightly higher in 2016 – up to 315,000 units delivered in the year, an increase of 2 percent from 2015. While the number of new deliveries is high from a historical perspective, it falls short of expectations, given that multifamily starts have been at or above 300,000 since 2013. Reasons include construction delays because of weather or skilled-labor shortages. In addition, some delays were planned so that delivery would occur during more favorable seasonal or competitive conditions.

Construction can stay at these levels as demand fuels development. The slowing of construction permits and starts in 2016, however, is a sign that the market is not overheated and developers are adjusting plans responsibly.

Demand kept pace with supply, holding vacancy rates relatively flat over the past year. With more competition entering the market, rent growth moderated in 2016 from the cyclical peaks of 2015 but remained above the historical average. Rent growth was softer at the high end of the rent spectrum in several markets that saw an explosion of new, luxury inventory, namely New York City, San Francisco, and San Jose. Rent growth in these areas will remain suppressed but only temporarily as new supply is absorbed and rent growth reverts back to its long-run averages.

2017: “Moderation” Is the Word

The multifamily market will continue to grow in line with the historical average in 2017. Employment growth is expected to remain near 2016 growth levels and demand for multifamily units to stay strong due to lifestyle preferences and demographic trends. At a national level, multifamily completions are expected to be higher in 2017 than in 2016 but will continue to enter the market at a disciplined rate. As a result, vacancy rates will increase modestly in 2017 and are expected to breach 5 percent for the first time since 2011, although remain below the historical average.

To read more of this article visit http://www.freddiemac.com/multifamily/pdf/mf_2017_outlook.pdf