Existing home sales probably won’t increase much in 2017, according to a new forecast from the National Association of Realtors and its fourth-quarter Housing Opportunities and Market Experience (HOME) survey.
A majority of renters – 57 percent – say now is a good time to buy a house but that’s down substantially from a year earlier – 68 percent. About 78 percent of homeowners say now is a good time to buy, versus 72 percent a year ago.
“Rents and home prices outpacing incomes and scant supply in the affordable price range has been a prominent headwind for many prospective buyers this year,” said Lawrence Yun, the NAR’s chief economist. “Making matters worse, the unwelcoming reality of higher mortgage rates since the election is likely further holding back confidence. Younger households, renters and those living in the costlier West region—where prices have soared in recent months—are the least optimistic about buying.”
For 2016, existing-home sales are on pace to be 3.3 percent higher than 2015 and be the best year since 2006. The 2017 forecast is for 2 percent growth. The median home price will grow by 4 percent in 2017, compared to 5 percent this year.
“Although the economy is expected to continue to expand with around 2 million net new job creations, existing home sales are expected to see little expansion next year because of affordability tensions from rising mortgage rates and prices continuing to outpace income growth,” Yun said.
It all hinges on inventory.
“Some would-be sellers may be reluctant to move up or trade down—especially if they’ve refinanced in recent years,” said Yun. “That’s why it’s extremely necessary for homebuilders to step-up their production of homes catered to buyers in the affordable price range. Otherwise the nation’s low homeownership rate will struggle to shift higher in 2017.”