2016 was a relatively calm real estate market. Houses gradually increased, some markets inflated higher than others and rates remained relatively low. But, is this what we are to expect for 2017?
According to a recent article in the Washington Post, don’t expect any big catastrophes in the housing market over the next year. One of the biggest changes will be the increase in mortgage rates. “The current rates already anticipated a Fed increase and potentially positive effects a Donald Trump administration might initially have.” Historically, when rates do start to increase, buyers that have been on the fence will start to lock in those rates.
So what will happen with the inventory?
Many homeowners have regained a lot of equity in their homes, so they feel comfortable putting their homes on the market without being underwater or losing money. Because more expensive mortgages will make the overall cost of buying a home higher, price appreciation may slow down. Many homeowners that may want to sell within the next few years may consider doing that sooner rather than later. Because of this, we might see higher activity than in 2016, but inventory will still be high enough to carry us to the year.
Even though interest rates will continue to creep upwards, getting the credit needed to buy a home or any other type of loan is not as hard as it was shortly after the crash. After January 1, 2017, the Federal Housing Finance Agency will increase the loan limits for conforming loans. These limits have not changed since 2006. In the past, anything over $417,000 was considered a high balance or jumbo loan but that limit will raise to $424,100 after January 1. The minimum limits will also increase slightly from $271,050 to $275,665. These increases also increase confidence in homebuyers that may be able to repay larger loan amounts and offer more options when it comes to the type of home that they purchase.
Required credit scores may also drop. Typically, lenders require credit scores of at least 620 but more likely 650 to qualify for a home loan. This may drop lower in 2017. Many loan programs through Fannie Mae and Freddie Mac as well as an FHA loan may require less than 3% down payment for first-time homebuyers, but these are not guarantees. Talk with your lender about different options when it comes to low down payment home loans.
So, in closing, were not going to see a huge change in the housing market but those changes will be positive for buyers and sellers. Although rates will increase, they will increase just enough to get buyers out of the woodwork and pull the trigger on their first home.