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2017 REAL ESTATE PREDICTIONS

Each year I take time to review what has happened during the year and to look forward to predict what is in store for real estate. Below are my predictions for the 2017 real estate market, based on data that was available at the time this was written:

Median Sold Prices – Home prices will continue to increase nationally by single digit numbers, about 5%. However, urban metro areas with high employment or that are in high demand by Millennials may still see increases at 10% or above. According to the National Association of REALTORS®, October’s national median price for existing single family homes was $232,200, which represented a 6.0% increase over October of 2015 (which was the 56th consecutive month of year over year gains). National inventory shortages coupled with high demand will continue in 2017.

Housing Inventory –  Although there are improvements in this category, it will take more than just a year for the situation to turn around. Our inventory shortage was caused by a shortage of housing starts that began during the recession. We will continue to see inventory challenges until new construction picks up even further. I predict that more buyers will be entering the market for a home as our economy is strong with low unemployment. According to the Bureau of Labor Statistics, the national unemployment rate stands at 4.6% for November, 2016, which is the lowest it has been since August of 2007. High demand and low new construction means a continued inventory crunch.

Housing Starts – Housing starts (the measure of homes that began construction) jumped from 900,000 in 2015 to 1.3 million in 2016. Although this is a welcome increase, it is still not enough to quench the demand. Our country needs about 1.5 million new starts per year to maintain inventory, but since 2009, we have been short a cumulative 5 million units. This is one of the primary causes of our inventory shortage and what is driving prices up – demand outweighs supply. In 2017, I predict that builders will finally surpass the 1.5 million start target and our inventory shortage will begin to wane by mid-2018.

Second Home Markets – Investment and vacation homes markets will continue to be strong in 2017. The passing of wealth from the Silent Generation (1925-1945) to the Baby Boomer Generation (1946-1964) is a strong driver of vacation home purchases. Investment properties are a hot commodity, especially in urban areas where rents are skyrocketing due to a shortage of housing.

Interest rates – The improving economy and almost full national employment is a sure sign that interest rates will continue to increase in 2017. The new rates will balance job growth and higher inflation rates. The Federal Reserve increased interest rates a quarter of a percentage point at its December meeting. The federal fund rate has a significant effect on mortgage rates. I expect the 30 year fixed rate mortgage rate will reach 4.75% by the end of 2017.

Home Listing Tips for the Holidays

If you have your home on the market right now, you may be wondering what you should do about decorating your home for the holidays. In my experience, a modestly-decorated home feels fresh and cozy, so don’t be afraid to break out the garland and garnish!

Here are my five tips for holiday decorating when your home is on the market:

1. Avoid adding clutter. Your home may be staged and de-cluttered before introducing holiday décor, so don’t just add décor without removing some of the items already in the room. As you are adding décor items to a room, keep focal points in mind. If you add a focal point with décor, make sure you remove something that was already a focal point. For example, if you have a dining room table scape with a runner, two candlesticks and a centerpiece, don’t just add a poinsettia to the table without removing the other centerpiece.

2. Consider a smaller tree if a larger one will make a room feel cramped. Since a seven foot tall tree can take up 20 square feet at the base or more depending on the type of tree, you may be better off either opting for a tree with a thinner base or a shorter tree put on a small coffee table or sofa table-height table.

3. If you put holiday lights on your house, make sure they are the same type and color. If they twinkle, make sure it is in a harmonious way. Having whole sections of your house blinking on or off at once while other sections are marching to the beat of their own drummer can be distracting to potential home buyers. You want the whole house to be what the buyer is focusing on, not the lighting show.

4. If baking is part of your holiday traditions, by all means, put on the oven mitts. It goes without saying that you should do a good job of cleaning up afterwards. I also suggest having a good storage plan in mind if you usually stage extra goodies on the counters. Find additional storage in the cabinets or pantry for those holiday treats to avoid clutter.

5. Beware of lit candles. If you have a last-minute showing and need to leave the house in a hurry, be prepared to blow out all the candles before you do. I recommend having someone in charge of this activity and having a reminder by the door to check all candles before walking out.

Also please remember that many people are sensitive to strong smells from potpourri and candles, so please use sparingly. If you have additional questions, don’t hesitate to give me a call at (206) 214-8499 or send an email to Veronique@belleresidence.com

A quick U.S real estate forecast for 2016

We are all curious about 2016 and what it will bring us especially for all of you thinking about buying your next home or selling your current residence. Here are some pointers gathered along real estate seminars and economist predictions.

seattle fog

Median Sold Prices – Home prices will continue to increase nationally by single digit numbers, between 5-6%. Urban metro areas in high demand by Millennials will see an increase in the double digits. According to the National Association of REALTORS®, the third quarter national median price for existing single family homes was $229,000, which represented a 5.5% increase over third quarter 2014. There are still areas of very high demand and low inventory and this will continue until new home starts can catch up to the lack of supply.

Housing Inventory – The inventory shortage was caused by the cumulative impact of home builders not being in the market for well over five years. This severe shortage fueled the demand.  We are still not back to our level needed to sustain regular inventory rates.  This probably won’t happen until well into 2017. It is likely that more buyers will be entering the market for a home. Improved job markets bring more buyers into the market and according to the Bureau of Labor Statistics, nationally the unemployment rate stands at 5.0% for November, 2015 – the lowest it has been since April, 2008.  We will continue to see inventory challenges until new construction picks up even further.

Homeownership Rate – The homeownership rate (the percentage of Americans who own their own home) is near the 20-year low of 63.7% in the third quarter of 2015, falling from the all-time high of 69.2% in 2004. The low was 63.4% reached during second quarter of this year. I predict this number will be even lower in 2016 due to the lack of inventory and increasing home prices due to the inventory shortages. The steady decline in the homeownership rate is partially the result of tight lending conditions and a historically low share of first-time buyers.

 

Housing Starts – The current pace of home construction is dangerously low at about 60% of the norm. New construction did not pick up enough in 2015 to address the housing inventory problem. Housing starts are well below the 50 year average of 1.5 million starts per year. Two big reasons for the slow recovery in new construction are the difficulty in obtaining construction loans and construction labor shortage. It is highly probable that housing starts to increase in 2016 as builders and investors are able to participate in the market because of the rise in house prices. New home starts should increase by at least 20% in 2016.

Interest rates – The improving economy is a sure sign that interest rates will increase in 2016. The new rates will balance job growth and higher inflation rates. The Federal Reserve increased interest rates a quarter of a percentage point at its December meeting.  The federal fund rate has a significant effect on mortgage rates. The federal funds rate had remained near zero since December 2008 and the Reserve had not raised rates in almost a decade.  The Federal Reserve will keep an eye on jobs, the economy, and inflation before determining action on additional rate hikes. However, the 30 year fixed rate mortgage rate are expected to reach 5.5% by the end of 2016.

Second Homes Market – Second home sales will continue to see a strong increase in 2016 due to the passing of wealth from the Silent Generation (those born 1925 – 1945) to Baby Boomers (those born between 1946 and 1964) and due to Baby Boomers buying multi-generational homes and vacation homes.

Rental Market for Owners/Investors – Due to dropping homeownership rates, the total rental income for investors has more than tripled over the past seven years, growing by an astonishing 240% from 2007 to today. The Census Bureau reports that median asking rent has increased 30.6% comparing third quarter 2005 to third quarter 2015 (as more rental households bring more rent). As Millennials enter the job market and strike out from their parent’s homes on their own, renting is usually the first step. There is high demand for rentals in urban locations where there is appealing job activity for millennials. High demand areas will continue to see double digit increases in rent. I predict rental demand in urban centers will continue to be in high demand in 2016. Source: http://www.census.gov/housing/hvs/files/currenthvspress.pdf  http://www.census.gov/housing/hvs/data/histtabs.html

 I am excited for what 2016 has in store! For additional information and predictions on our local market. Please call or text: (206) 214-8499 or send me an email to Veronique@belleresidence.com.

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