Outlook for 2017
Trump’s victory brings some uncertainty to the housing market in 2017. How will his policies impact interest rates? Will Fannie Mae and Freddie Mac be privatized? Will the roll back of Dodd Frank improve credit availability? Will tax reform affect homeownership? Despite all this noise and uncertainty at the national level the Salt Lake County real estate market will have another very good year in 2017.
Mortgage rates will tick-up
The Fed has signaled that more short-term interest rate hikes will come in 2017 and most forecasts have mortgage rates increasing to around 4.5 percent by year-end. The likelihood of tax cuts and more defense and infrastructure spending will put some upward pressure on interest rates but the mortgage rate will remain quite favorable. The small increase in rates rather than deter potential homebuyers may spark interest “to get in before rates move even higher.”
Affordability will decline
Although wages are expected to increase by 3 percent in 2017 this will not be enough to counter higher home prices and higher interest rates. How much declining affordability will hurt demand is uncertain but it will not be enough to change the upward direction of home sales and prices, particularly given the increased housing demand from high rates of net in-migration in 2017.
More millennials will move to homeownership
Millennials in Utah have a greater share of the population than any other state. Seventeen percent of the population in Salt Lake County is in the 25 to 34 year age group. Nationally, almost 14 percent of the population falls into this age group. And of course this is the prime age group for home buying. But in Salt Lake County as elsewhere today’s millennials are more likely to rent than own. In 2015, only 43 percent of millennial households were homeowners; in 2005it was 53 percent. Some housing economists predict that there will be a trend back to homeownership for this age group as the rental market becomes less attractive due to higher rents and low vacancy rates.
Supply will improve some
The scarcity of listings, a defining feature of the 2016 market, will continue into 2017, but should improve some as more homeowners enter the market, cashing-in on some of their increased home equity.
Strong price and sales increases but not double-digit
Another year of housing price increases will be supported by very favorable fundamentals; low interest rates and solid demographic, job, and wage growth. These fundamentals combined with the exceptionally strong demand, as well evidenced by the record low “days on market,” will push the median sales price of a single-family home to the $310,000 to $315,000 price range; a 5 to 7 percent increase. Home sales will see a slightly lower increase with single-family sales increasing to around 14,000 homes; a gain of 3 to 5 percent. Condominium prices and sales will be even stronger, both increasing from 6 to 8 percent. And finally,residential sales will total six billion dollars, up 9 percent and residential real estate commission will hit $360 million, an 11 percent increase.
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