2017: What to Expect in the Housing Market

Kimberly Bean
Kimberly Bean
Published on January 10, 2017

The new year is knocking at the door, and one of the questions I get asked most is where I see the Southern Maryland real estate market headed in 2017. Buyers, especially, want to know whether the market with change into one that is a little more favorable to their interests.

If only I had a crystal ball! I’d cut right to the chase and let you know what’s going to happen with the Southern Maryland market this year. But we don’t have a handy tool for discerning the future, we have to rely on experts in various economic niches for our market predictions every year. Are they always right? No, but they get awfully close.

I like to combine what I learn from these economic forecasts with my experience on the ground here in Southern Maryland. Let’s dive in.

What will happen to interest rates?

You may already know that Feds raised the federal funds’ interest rates earlier this month. While it was only a quarter of a percentage increase, they did say to expect a couple more rate hikes in 2017. How does this affect a real estate consumer?

Those with an adjustable rate income (ARM) will take a hit, as will homeowners who have an adjustable rate home equity line or credit (HELOC) that is tied to the prime rate. (This will be a smaller, hardly noticeable hit in most cases.)

If you’re planning to buy a Southern Maryland home and need a mortgage, the Feds’ move should encourage you to act more quickly than you’d planned. Don’t let it scare you off completely. Mortgage rates are still at historic lows right now, even with the interest rate hike in December.

If those additional interest rate hikes actually happen, homebuyers on tight budgets who choose to wait until later in the year may find themselves locked out of the market. Even an increase of half a percent on a 30-year fixed $250,000 mortgage could increase your annual payment more than $850, according to Fortune.com’s Kerry Close.

In other words, if mortgage interest rates go from 4 percent to 4.25 percent, the National Association of Home Builders (NAHB), says 965,000 potential homebuyers could leave the buyer pool.

Don’t be discouraged. There is good news. “There’s a lot that buyers can do to mitigate the effects of rising rates, including looking for lower-priced homes, putting more money down, or changing term lengths on a mortgage’s fixed-rate component,” Jonathan Smoke, chief economist at Realtor.com tells Inman.com’s Amber Taufen.

How about home prices in 2017?

This is the burning question for anyone who wants to buy a Southern Maryland home down the road. By the end of November 2016, the median sales price for a home was $271,400, up 7.7 percent from last year.

Housing market experts predict that although home prices won’t rise as quickly as they did in 2016, home prices will increase about 3.5 percent in 2017. So, as long as those interest rates stay put, there’s good news for those who need to wait until later in the year to buy.

The bad news is for buyers on a tight budget, at least according to a study by the NAHB. They claim that a $1,000 increase in the median price of new homes would knock 153,000 potential homeowners out of the market.

Planning to upsize? Fortune.com’s Close says you’re in the sweet spot. Prices on small homes are expected to rise faster than larger ones, and city dwellers can expect greater home appreciation than those in outlying metro areas. Your small Southern Maryland home will be the belle of the neighborhood real estate market when you list it.

This, of course, leaves first-time homebuyers and those who want to downsize in a not-so-sweet spot. You’ll have lots of competition from other buyers for those smaller houses in lower price ranges. Get ready for it by cementing your financing and being ready to submit an offer immediately. I can help you with the preparation part – don’t hesitate to give me a call or drop me a line!

What about inventory?

A good share of the blame for the current low inventory of available homes – which is causing home prices to rise – goes to the lack of new home construction across the country. There has been some good news on that front, however: December’s National Association of Home Builders/Wells Fargo Housing Market Index rose to the highest level since summer 2005. This is a measure of homebuilder confidence, and it is good news for buyers as long as it translates into new housing starts.

So, what does all this mean?

The Southern Maryland housing market’s strength depends on many variables, and the health of the job market is one of the most important of those variables. It is better than it was during the recession, and even though President-Elect Trump is promising to amp it up, hiring is still not where we’d like to see it. Fed policy makers will look at this when they decide whether to raise rate again.

This is a lot to consider as you think about your future home-buying prospects, but there’s honestly nothing you can do about anything that will impact the housing market. My best advice? Jump in as soon as you can.

Hughesville MD Homes for Sale and Real Estate Services in Southern Maryland. You now have a search engine to help you with your Southern Maryland home search! And I’m ready to provide you with a custom home valuation if you’re considering selling your home. Let’s connect to discuss how I can help you. Contact Kimberly Bean at 301-440-1309

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