As we prepare to bid farewell to 2016, we are already taking a sneak peek around the corner. The market is reverting to normal prices, the appreciation is cooling off, and the interest rates have moved from the record-low levels. Metropolitan urban areas in the West still drive global growth, but new players across generational and geographical lines are emerging. The signs are mixed, and of course, the market is dependent on overarching economic expansion. Still, we do not think that a huge shock will significantly affect the 2017 market.
At any rate
Mortgage rates remained low for most of this year, even approaching all-time lows, but the political seismic shifts (chiefly the shocking triumph of Donald Trump) have shot them upward, together with the interest rates. These tendencies will probably lead to a slow increase in prices in Q1 2017, although this will not change the very layout of the market.
Moreover, in the hottest markets, sellers can expect to do well and receive multiple offers for their properties. Buyers have a reason for optimism due to lower prices, but only as long as the rates do not undergo another upsurge. Therefore, 2017 should be able to make up for the lack of inventory that was present in 2016.
This year has demonstrated the growing importance of technology in real estate, but 2017 will make this even more obvious. More and more people are opting for online platforms and apps that streamline the process of researching and purchasing. Take for instance an excellent Smith mobile app, which allows you to produce a list of needed projects, interact with home improvement contractors, and receive accurate estimates.
Furthermore, experts argue that we will see the rise of drones and 3D virtual solutions in the sector, especially for purposes of capturing and presenting properties and generating stellar content for social media. Naturally, the tech-savvy generation will make the most of this and will cultivate a stronger boom in sales.
In 2016, the millennial cohort (generation Y) played an important role, and it seems that the long-awaited arrival of this market powerhouse is finally here. Millennials are now the largest segment of the buyer population and constitute the majority of the first-time buyers. Thus, they are seen as a driving force behind the market growth.
Yet, the problem for them is how to find an affordable, entry-level home. Perhaps that is why millennials lean towards suburban neighborhoods that will account for the bulk of the residential growth in 2017. On the other hand, those who have saved ample funds will go for something more than just a condo or starter home. In general, the outcome will be market “moderation” and optimization, not slowdown.
Suburban with a twist
Many suburban areas are adding urban amenities (parks, public schools, shops, etc.), which gives rise to a new phenomenon called the “surban living”. As a result, people will be able not only to live, but also to work, play, and entertain outside core urban areas. This blend allows homeowners to get the best of the both worlds, and immerse in an inclusive rather than exclusive environment.
The demand will be fueled by some other developments. Namely, apart from millennials, a new player is joining the game, generation Z. Presently, they may be just teenagers sitting comfortably in family nests, but they have an urge to gain independence, and will soon be able to actually afford their own home.
The good, the bad, and the ugly
As it has always been, the first months of 2017 bring the lowest number of sales, giving us another slow start. But, as people recover financially from holidays, the market will pick up and overcome inventory starvation. Millennials will get off the fence and technology will delight us with drone flyovers and app surge. Real estate will likely continue to be a seller’s domain, but the demand could be plagued by financial challenges. Still, in the absence of ugly economic and political turmoil, 2017 should be a rather good year for buyers.