With the dawn of February, comes the advent of a momentous tradition that dates back to 1887 – Groundhog Day.
Featuring a rodent meterologist, this day was first celebrated in Punxsutawney, Pennsylvania and has roots in roots in the ancient Christian tradition of Candlemas Day, when clergy would bless and distribute candles needed for winter. According to tradition, if a groundhog comes out of its hole on this day and sees its shadow, there will be six more weeks of cold winter weather. Tradition also states that an early spring is indicated if the groundhog does not see its shadow.
Here is to hoping that Phil the Punxsutawney groundhog, does NOT see his shadow tomorrow, when he emerges to predict the next few months of weather.
Like Phil, we have a few predictions about how the real estate market will behave over the next few months.
Unlike Phil, we have done research and are not scared of our own shadows.
Based on our research, here are a few things you can (most likely) expect over 2017:
- While 2016 saw record-low rates, mortgage rates have begun to rise following the election. Experts predict that rates will climb by half a percent over 2017.
- According to predictions by Joe Kirchner, senior economist at Realtor.com, millennials and baby boomers will dominate demand in the housing market will millennials making up 33% of the buyer pool and baby boomers representing another 30%. This prediction is expected to hold true for the next decade.
- However, as more “first-time buyers” (millennials) seek out their first homes, the available inventory is expected to continue to drop in 2017. Which inventory already down an 11 percent in the top 100 metros in 2016, this means that home buyers will have even fewer choices.
- Kirchner further predicts that the West will outpace the rest of the country in real estate action, with home prices in Western cities increasing 5.8% and sales increasing 4.7%.
- According to Zillow’s chief economist, Dr. Svenja Gudell, new construction projects will also be hit with higher costs. In Zillow’s 2017 Market Predictions, she argues,
“Buyers of new homes will have to spend more as builders cover the cost of rising construction wages, driven even higher in 2017 by continued labor shortages, which could be worsened by tougher immigration policies under President-elect Trump.”
- There are some positive expectations in place as well. Gudell predicts that as incomes rises and rent appreciation slows, rental affordability will improve. Her argument is supported by Urban Land Institute’s October 2016 Real Estate Consensus Forecast, which noted that apartment rental rate growth is expected to moderate to 3.0 percent in 2017, but remain above the 20-year average growth rate of 2.8 percent.