There are many diverse and emotional opinions surrounding the economic landscape of the future. Questions relating to immigration, taxes, the Supreme Court, political parties, the stock market, and everything related to all the above. This article is primarily focused on what we might expect from the real estate market both nationally and locally.
The good news is that the economic wheels of motion were in place before the election. After reviewing many economic forecasts and related political opinions, it is apparent that history should only be considered…history. There were no experts predicting a Trump victory, prior to the election. People refrained from investing in the stock market (not anticipating record high indexes), and we still don’t know if, and when a big ole shiny new fence will be constructed on the Mexican border.
“The only thing constant, is change”. So apply a little flexibility to the following real estate overviews, and the outlook for 2017 will become slightly more clear than mud.
Inventory Levels – When housing demand is high and available homes for sale (inventory) is low, prices (values) will be strong and will continue to rise. Inventory levels in most major metropolitan cities are at lower-than-normal levels and most experts feel the supply of homes for sale, both existing and new construction, will not improve much over the next few years. Inventory levels and home affordability typically improve as you drive farther away from urban epicenters. In suburban and rural areas, values provide more bang for your budget. The trade-off is that you may put more miles on your car and values will probably not rise as quickly.
Interest Rates – We’ve been spoiled and almost lulled to sleep with astoundingly low rates…WELL, IT’S OVER. We may see some volatility over the next 2-4 months, but the train has left the station. I have seen predictions ranging from 4.5%-5.5% by 4th quarter of 2017. The low was 3.5% percent in 2016 and are now about 4%. This increase may slow the market a bit (especially in the lower price ranges), but I believe people will realize we hit bottom and may do something before rates move further north. As an example, the payment difference between 4% and 5% on a $400k (30 year) loan goes from $1,908 (PI) to $2,148/month.
Virtually every current homeowner has refinanced or purchased a new home at low rates over the past 10 years. At some point, people moving to a new home may find rates to be a challenge as they might not be able to buy their own home back without increased monthly payments.
Prices – The average price of a new home is still increasing, however, the pace may soften a little. Nationally, prices have appreciated nearly 6% in 2016, with Denver being a top rated city with an annual increase of 9.6% (according to REColorado). National predictions (from NAR) appear to be in the 3-4.5% range while Denver is likely to range from the 6-8% in increased values. According to the U.S. Bureau of Labor Statistics, Colorado ranked 5th in job growth and 12th for total job increases.
Timing may not be everything, but it may likely provide more value to your investment in 2017.
For more information, contact downtown managing broker, Steve Blank, of LIV Sotheby’s International Realty at 303.520.5558. To service all of your real estate needs visit www.livsothebysrealty.com.