New Year, New Home: What This Year's Home Buyers Need to Know

As 2016 comes to a close and 2017 makes its appearance, home buyers may be wondering what the real estate market and upcoming trends for the new year are predicted to be. If you're looking to buy a new home in 2017, here are a few of the relevant housing trends and predictions you'll want to know about. We've consulted with the experts in the field and here's their insight for what you can expect when considering a new home for the new year.

While predicting how the real estate market will behave is never an exact science, this year could be especially difficult to predict according to the experts, Svenja Gudell, chief economist for Zillow, and Jonathan Smoke, chief economist for Realtor.com. "I think at this point it will be a very interesting year as we see what President Trump will put into place as far as housing policies," Gudell said. He cited possible changes to affordable housing regulations, vouchers and how the Federal Housing Authority works during the Trump administration.

With that said, here's what to watch for in upcoming housing trends and real estate market predictions for 2017.

Increasing net worth for homeowners.

A tight housing inventory combined with increasing home prices translates into a higher net worth for homeowners this year. An article from The Fiscal Times reports:

After a 6.3 percent increase over the past year, home prices are poised to rise another 5.2 percent through September 2017, according to a recent report from CoreLogic. Rising prices have doubled the amount of home equity held by Americans with the average homeowner gaining more than $11,000 in home-equity wealth last year alone. If home prices continue to increase as projected, Americans would add $1 trillion in home equity to their collective balance sheets next year.

Millennials and Baby Boomers are expected to be the big buyers.

As the oldest of the millennials push into their mid-30s, many will start to settle down and buy houses, Smoke and Gudell said. A number of factors are contributing to this generation's decision to start buying homes. More jobs are being created for 25- to 34-year-olds than any other age group, and wages are rising, Smoke said. Millennials are also reaching an age at which they're thinking about marriage and children.

Baby Boomers, the oldest of whom are entering their late 60s, are also looking to move as they reach their retirement years, Smoke said. In the last several years, Baby Boomers' participation in the housing market has dwindled. Many already own homes and may have been reluctant to sell until their properties recovered the value they lost in the housing bust, he added.

There are lower down payment options.

U.S. home buyers are putting down less to purchase homes these days. The good news is that there are still lower down payment options for you in the new year if you know where to look.

Most home buyers really don't need to have 20% saved up for a down payment in this day and age. In fact, some loan programs allow qualified people to buy homes with no down payment at all. Other loan programs allow down payments as small as 3 percent or 3.5 percent.

• The Department of Veterans Affairs guarantees zero-down VA mortgages for qualified borrowers: veterans, active-duty service members and certain members of the National Guard and Reserves.

• The U.S. Department of Agriculture guarantees zero-down mortgages as part of its Rural Development program. The loan guarantees are available in eligible areas (mostly rural areas, though some are suburban).

• Navy Federal Credit Union offers zero-down mortgages for qualified members to buy primary residences.

• Federal Housing Administration-insured mortgages allow down payments as small as 3.5 percent. And a few lenders offer conventional mortgages with down payments of as little as 3 percent with private mortgage insurance.
  

With mortgage rates near 3.5% and home values rising in many U.S. markets, it's an excellent time to be a buyer, since the market may be less favorable to buyers as 2017 progresses. But only time will tell.

It's easier to get a mortgage... but rates are going up.

It�s easier to get a mortgage now than at any time in the past eight years, according to the Mortgage Credit Availability Index. Banks may also be more willing to work with borrowers over the next few years as they look to make up for a decline in refinancing business when interest rates go up. "The pendulum has been swinging toward a loosening of the credit box a bit,� says Daren Blomquist, a senior vice president with Attom Data Solutions. "I don�t think we�ll see a reversal of that with the new administration. We�ll likely see an acceleration.�

Following the housing market crash, mortgage rates remained at record lows for years. However, that's starting to change. Rates are climbing now and are expected to keep doing so next year, with the Federal Reserve indicating that three more increases to its benchmark rate are coming in 2017. "As a buyer or seller, this essentially points to acting sooner rather than later if you're intending to do a transaction next year," Smoke said. "Rates will get higher as we go through the year, and inventory is not going to improve. So winter or early spring will be more advantageous than waiting for late spring or early summer, when most buyers emerge."

New homes are getting smaller.

It appears there are several reasons for this. Also according to The Fiscal Times report:

The median square footage for new homes this year fell for the first time since the recession. Smaller homes are the product of several trends driving the real estate market, including higher demand for homes close to city centers where space is tight, and continued growth in the "tiny home� movement.

The shift also reflects a renewed focus by builders on the neglected market of entry-level buyers. "They�re building smaller homes because people can�t afford to buy the larger homes anymore,� Chief Economist at Texas A & M�s Real Estate Center.

The real estate market is becoming more welcoming to first-time buyers.

After years of shutting them out, the market has become slightly more welcoming to first-time buyers. "On the supply side, builders are finding business models to provide the level of product, such as townhouses, that first-time buyers are looking for,� says Robert Dietz, chief economist with the National Association of Home Builders. "And on the demand side, wage gains and the demographics of today�s Millennials who are marrying and having kids later, will help.�

Millennials are more secure in their jobs, so they�re better qualified for mortgages, particularly the ones with low down payment options. While inventory is still tight, many institutional investors have left the market, which makes it easier for first-time home buyers to compete for entry-level properties.

Sources:
CBS MoneyWatch Article: 9 Real Estate Trends to Expect in 2017
The Fiscal Times Article: 10 Real Estate Trends to Watch in 2017
Bankrate.com Article: 10 Tips to Have an Awesome Mortgage in 2017

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What does 2017 have in store for you personally? Are you looking to buy a home or property in the new year? If so, we hope this insight helps you with your real estate planning!