Was 2016 a Buyer or a Seller’s market and what does that mean for the upcoming year?
In past year in most sectors of the Brevard County market, the answer is obvious, 2016 was a seller’s market. Even more so in certain parts of the country, areas like Denver (Colorado) and San Francisco (California) it has been a seller’s market now for quite some time with rapid price increases. However in certain sectors of the market, it’s not as distinguishable, and with mortgage rates rising and increasing inventory, the course of action for 2017 seems to be shifting. Here is what we can expect in 2017 whether it will lean towards buyers or sellers according to a gathered group of economists.
Pivotal Takeaways For The Upcoming Year
- 2017 will likely remain a seller’s market in most places, but in the next couple of years following, buyers might again have their day.
- New and upcoming buyers look to be much more diverse, younger and more technologically savvy than ever before.
- Slowing price appreciation. Realtor.com forecasts home prices will grow at 3.9 percent annually, compared to an estimated 4.9 percent in 2016.
- Buyers of newly built homes will have to spend more to cover rising costs of construction.
- More people will have access to home loans. Next year, Fannie Mae and Freddie Mac will raise its loan limits for the first time since 2006, increasing them to $424,100
2017 Overall Outlook Is?
Overall, the economists I’ve researched said they believed 2017 will continue to be a seller’s market,
even with expectations of inventory rising in the upcoming year. I’ve gathered a few quotes from some of the industry experts to help give us some guidance.
- “In 2017 new construction will pick up steam but not enough provide ample footing to a prolongated housing market. Most likely sellers will find that it takes a fraction longer to sell, though demand will still outstrip supply on the coattails of a rising job market that will continue to grow.” ~ Matthew Gardner, chief economist at Windermere
- Svenja Gudell, chief economist at Zillow agreed saying that,“ It looks like in 2017 most markets will favor the seller, even in areas such as the Midwest it probably will be more of a seller’s markets than a buyer’s.”
- According to Jonathan Smoke, chief economist at Realtor.com geography does play a role in this 2017 housing outlook, “Ultimately, it depends on I think on where in the country you are and not necessarily at a market level,” Smoke said. “What we seem to be seeing are patterns emerging within various markets. Where one area might be cooling down but another part is now on fire. The real estate market is so locally subjective I would say a neighborhood view is really where you see the contrast and variations that are taking place countrywide.” He also mentions in the Midwest that first-time buyers have been most successful this year. Whereas markets in the West having seen significant price appreciation, has made it difficult for first time home buyers to achieve success. “What we seem to be having are markets that are either above average in price or in sales expectation. There aren’t many markets that are above fair expectations in both areas. The fact that there are supply constraints is really what’s driving the price movement in stronger seller’s markets.But in areas where it’s the buyer’s markets where buyers can get an affordable home, those markets are seeing a greater growth in sales,” Smoke said. “In the end though really either one is good for the real estate market” he concluded.
Will We Begin To See A Change?
Zillow asked a group of more than 100 economic experts what they thought was going to happen with the seesaw of ‘Buyer vs the Seller’ and they found that among the economists spoken to, the prominent position of thought was that in 2018 or 2019, most real estate markets will begin to change from a seller’s to a buyer’s market. Gudell added,
“In a few markets, in 2017 it will already start to turn around. In areas where the demand isn’t quite as high and you have a bit more inventory buyers will be better able to negotiate.”
In a lot of sectors in the local market, we are already seeing signs of this shift with Buyer’s having more options and becoming very price sensitive. In the beginning of 2016 we saw very little pushback with buyer’s on pricing but now, with most seller’s pricing in anticipation of further gains, buyer’s are pushing back. In the 3rd and 4th quarter of 2016 we are seeing more expired listings and price reductions than we have in the previous year.
What Exactly Does The Future Homebuyer Look Like?
Chief economist at First American, Mark Fleming, says “Figuring an environment with somewhat modest and predictable mortgage rates, it turns into more of a first-time homebuyer/purchase oriented marketplace. As a Real Estate Agent the question will be, how do you locate and advertise to a first-time homebuyer?” said Fleming. “That homebuyer who is buying for the first time is more than likely a young, college educated, tech-savvy millennial. And another change in the buyer we are expecting to see is they will be, ethnically diverse.This first-time home buyer is a different kind of individual than we’ve traditionally seen before.”
“What you will see is homeownership rates will grow, and the buyer will be not predominantly white and also younger,” agreed Gudell. “The downside of this boom, I think for a lot will be spending more time in their car as more have to look for more housing outside of the city as urban area living becomes more expensive,” she added. “During the recovery period, urban living really grew and have appreciated much faster than suburban areas.”
“For the real estate industry, the biggest shift we need to deal with because it more than likely means an elongated period of time people are spending in their house hunting journey, specifically the first time buyer. It also can mean higher cancellation rates as well as lower conversion rates. You’ll be challenged more in the upcoming future with contending with buyers who will be needing to qualify for and buy a home in the environment we’re in now as opposed to the environment we’ve been in the last couple of years.”
In the past few years, it seemed that highly qualified and a pent-up demand was driving the market. But now, it is a more organic activity at a time when interest rates are on their way up.” Smoke added, “Potential for an even bigger year than we’re forecasting is definitely there, it for certain though comes with its own set of challenges which is why we’re thinking there will only moderate growth as opposed to huge growth.”
“The thing about the housing market is that everyone needs it and there isn’t a way you can outsource it.” concluded Fleming.