2017 real estate expectations

December 12, 2016

 

Several real estate market drivers will deliver changes in 2017

 

Interest rates

 

We’ve become accustomed to stable, low interest rates for several years now regardless of intermittent discussions of rate increases. 2017 will usher in these rate increases. In fact, we have already seen interest rates climb since the election and most economists expect the Fed to hike their rate at their mid December meeting. Keep a cool head though since rates will continue to be historically low for some time now!

 

Nonetheless, higher interest rates could create a slowdown in the housing market. Given the amount of “pent up” demand among homebuyers, small rate increases would likely not have a big impact. However, as history tells us, bigger moves may cause a slowdown in our real estate market.

 

Inventory

 

We expect that the lack of inventory will continue to fall short of buyer demands. Mark Fleming, chief economist at First American, indicates that further trouble may creep up here if current potential sellers decide not to sell because interest rates are too high weakening their purchasing power for their “move up” property.

 

Affordability

 

An increase in wages and a more vibrant economy in general can help alleviate the impact that high rates and low inventory have on home buying affordability. Under a scenario of increasing wealth, the affordability issue becomes less of a danger. However, this is less of an impact on younger, first-time homebuyers who may not be beneficiaries of such improving wages right away.

 

Sales Growth

 

Jonathan Smoke, Realtor.com’s chief economist, has suggested that while there will be a slowdown in the US real estate market, there are 10 metro markets, including Los Angeles, that are expecting higher than the national projected growth:

 

Average price gains of 5.8% (3.9% national projection)

 

Sales growth of 6.3% (1.9% national projection)

 

A bustling economy would contribute to an increased demand for luxury property that symbolizes our South Bay real estate. This factor, combined with all of the other solid reasons to live and invest in the South Bay, leads us to expect a strong local real estate market in 2017!

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