Real Estate Trends to Watch in 2017
2016 was a great year for the real estate market. People finally forgot the avalanche that hit the great housing bubble in 2008. Large numbers of foreclosures that followed in the wake of recession and continued in the next year as well made people wary of real estate. But it staged a strong recovery and 2016 recorded high volumes of sales with low mortgage rates and healthy prices of properties. But nothing is certain on this world as has been proved by the win of Republican Donald Trump for the post of POTUS.
There are hundreds of economic activities and real estate is just one of them. But it is nothing like any of the other activities in the sense that it is perennial in nature and serves a mode of investment. It also helps in wealth creation for buyers. Like all other businesses, real estate has changed dramatically in the last few decades and it has become technology savvy and also easier for common people. But no one is sure as to what will be the shape and nature of real estate in future. Let us find out what it will be like in near future.
The last decade or so have been full of unprecedented events in the real estate market. We have seen dramatic rise in property prices coupled with lowering of mortgage rates followed by a crash leading to the bursting of the housing bubble. The country witnessed very strict norms for lending for homebuyers from the banks and then a slow but steady recovery or prices back to what they were before the crash. Present conditions are rosy for the real estate market and they do not look like changing too much even if interest rates go up slightly. The factors to look at when pondering about real estate future are as follows:
Majority of home buyers would be very young
The biggest age group in America today is that of 23 year old individuals. It represents a population that is ready to take off in its career and dreaming of owning a house. In coup-le of years, most of these individuals would marry and settle down. They would start thinking in terms of their own home. This is a very promising scene for the future of real estate. But this is also the age group that banks remain wary of because of loan defaults. The young age of the borrowers might work against the real estate industry in near future.
Industry will be shaped by the activities of baby boomers of today
However, the real estate market is not going to be shaped by these young individuals alone. The 2nd biggest age group in America in present time is that of 54 year olds. Over the next decade or so, baby boomers will form a sizeable portion of the population (only second in size to Millennials). The kind of money at the disposal of this group and their choice in housing will shape the future of real estate in the country.
Interest Rates since Trump was Elected
Not even the critics of the Democrats were prepared to see Donald Trump getting elected to the office of the President of the United States. Conventional wisdom suggested a big win for the Democratic Party candidate Hilary Clinton and the later mild increase in the interest rates announced by the Federal Reserve by the end of the year. But nothing of this sort has happened and the reality is that it is the Republican Party which is back in charge with the chair of the President going to an improbable candidate called Donald Trump.
Just before the election in November, experts were of the view that only election turmoil can force the Federal Reserve to hold back on the proposed interest rate hike in December. And they proved to be right. A different set of conditions have emerged post elections and there are strong fears that Donald Trump could initiate a strong cut in government spending. Although reduced government spending is in favor of the honest taxpayers, financial experts believe it could lead to a recession in the economy with even stock markets reacting with uncertainty. Right now, no one is sure what is in the offing from the Presidency of Donald Trump. If one sums up all these factors, it looks likely that the country and the citizens should brace for a year of low-interest rates.
Real Estate experts are happy with the election of housing magnate Donald Trump as the new President of the country. They are pretty sure there will not be any major changes in interest rates in the near future. This is because the fundamentals leading to a regime of low interest have not changed much. This could signal an era of certainty and positive sentiment for the housing industry. Low-interest rates coupled with regulatory relief would mean more credit released for the housing sector. This will be encouraging for the home buyers who have faced the crunch because of tight credit situation in the past.
However, in the long run, if the fears of economic slowdown do turn into reality, interest rates could begin to rise. This would be a direct result of the inflationary pressures. Already, the 30 years fixed mortgage rate of interest has gone up by half a percentage point. The prices of stocks have gone up but the prices of bonds have plummeted. Interest rates on bonds, both government as well as corporate, have also gone up since the election of Donald Trump.
Be Careful in 2017
You need to remain alert and cautious if associated with real estate market in this year and the coming years. Indications are that interest rates will be hiked by lenders in near future. While this hike will be nominal, more credit is expected to flow towards real estate and construction activities in particular. There will be more new homes for the buyers and Millennials will jump in the fray to give a big boost to the real estate.