Ah, the experts are at it again
Here’s what they say as close to a nutshell as I can put it:
- Mortgage rates will rise throughout 2017
- Inventory will still be a problem as will affordability
- There is a potential for large number of first-time homebuyers to enter the market but there will be new challenges (see above).
Some of the experts predict 5% and above as to where the interest rates may hover. For a healthy real estate market, having a million homes built or sold in a year would be ideal. Presently, we are at half that.
Conundrums and Baby Boomers
Here’s the conundrum. Homeowners with low interest rates will be reluctant to lose that rate to move into a bigger, more expensive homes that will be even more expensive if interest rates keep rising. They may decide to not move and remodel or build an addition instead. Ditto with aging baby boomers who decide to adapt their homes to age in place instead of downsizing into a home that is priced much higher than it was even two years and carries with it a higher interest rate, unless they have the cash to buy outright. But cash is less and less of an option for a lot of people in that age bracket.
Affordability is a huge problem with low inventory. New construction is not serving the mid to lower-tier market because of increased builder costs.
Here Come the “Echo-Boomers”
And then there’s the millennials. The numbers of “echo-boomers” expected to buy in 2016 didn’t materialize but with increased wages and delays in purchasing a home, they may be able to buy the home they want, leap-frogging the entry-level home.
There were a couple of wild cards mentioned that could affect the housing market. With an expected deregulation of banks, it will be easier to qualify the unqualified. The bankers call this “innovation.” I call it a potential repeat of the market crash of 2008. They also mentioned the “R” word—recessions, which tend to move in 7-10-year cycles. It’s been almost 8 years since the last one. No signs of it but…
It was fun reading Inman’s article but it’s irritating to keep seeing only one woman out of 8 experts quoted when it comes to economics and housing market. Where are the women in economics and housing?