What Will Real Estate Look Like For You In 2017

Despite the country’s current political divide we can all agree that starting January 1st there will be many economic and real estate changes, some we’ve already started seeing. ‘I think if you’ve been sitting on the fence… the likelihood of Fed rate increases over the next 15 months, means you should jump off the fence right now,” said Rick Sharga, executive vice president of the online real estate market Ten-X.

 

The TRUTH:

Prices rose too high too fast. The real estate market is cyclical and we’ll be in what’s called a buyer’s market for the next 4-7 years as prices level out.  While forecasters expect a boost in economic growth the real estate market will also be affected by expected higher interest rates. Government bonds interest rates have already jumped to 2.23 percent from 1.88 percent since the election. These rates directly impact mortgage rates, largely affecting 30-year fixed-rate mortgages.

 

The BAD:

Higher interest rates means buyers won’t qualify for the same amount of financing like with the low interest rates they enjoyed in the past few years. If a buyer was qualifying for a $1MM property at 3% and interest rates rise up to 4%, that buyer will be paying $10,000 more each year in interest alone. On a 30 year note, that’s $300,000.00. This drastically affects what price range a buyer will qualify for.

 

This also affects sellers. Sellers will need to drop their prices to stay relevant on the market as it continues to cool off. Seller’s will also have less qualified buyers (as previously mentioned). So instead of having 100 qualified buyers for their $5MM condo, they will only have 50.  

 

The UGLY:

Should a homeowner be behind on mortgage payments right now they need to act FAST to apply for refinancing, loan modifications, or a short sale and they must submit this paperwork by December 31st. As President Obama’s presidency ends, so does the Making Home Affordable Act, which allowed millions of homeowners to avoid foreclosure. Without this help, a homeowner may certainly face losing their home and damaged credit for 7 years.

 

The GOOD:

There is light at the end of the tunnel! The good news is that we are one step closer to what’s considered a healthy economy by interest rate standards (7%). Higher interest rates could assist first-time home buyers with bringing listing prices down. Millennials, people aged 18 to 34, are expected to drive demand in the housing market in 2017.

 

As Mr. Sharga said, now is the best time to act if you’re looking to sell or buy.

 

Be sure to speak to a real estate professional from the Alliance Team to explain to you what your options are!

 

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