Realtor.com’s economic data team has once again analyzed its market data and economic indicators to develop a picture of the key housing trends for 2017. Here are some of the key predictions for the coming year:
Millennials and boomers will move markets
In 2017, the U.S. real estate market will be in the middle of two massive demographic waves that will power demand for at least the next 10 years. Millennials and baby boomers — the two largest American generations in history — are both approaching life stages that typically motivate people to buy a home: marriage, having children, retirement and becoming empty nesters.
Realtor.com’s chief economist, Jonathan Smoke, predicts that millennials will make up 33 percent of buyers in 2017, lower than his original estimate due to those increasing interest rates.
Millennials will look to the Midwest
Although the financial picture may look grim for the youngest home buyers, the Midwest, with its affordable cities, still looks good. Realtor.com expects Midwestern cities to continue beating the national average in terms of its proportion of millennial home buyers in 2017. Leading the pack are Madison, Wis.; Columbus, Ohio; Omaha, Neb.; Des Moines, Iowa; and Minneapolis.
“It’s easier for millennials to buy in more affordable markets like in the Midwest,” says Smoke. “We’re also seeing large numbers of millennials buying in Midwestern markets with or near big universities. So, part of this is an effect of recent graduates with good jobs being able to settle down in these more affordable markets.”
Price appreciation will slow
Nationally, home prices are forecast to slow to 3.9 percent growth year over year, from an estimated 4.9 percent in 2016.
“Prices are still likely to go up at an above-average pace as long as supply remains so tight,” says Smoke. “The inventory problem is not going away.”
Of the top 100 largest metro areas in the country, 26 markets are expected to see price acceleration of 1 percentage point or more, with Greensboro, N.C.; Akron, Ohio; and Baltimore experiencing the largest gains. Likewise, 46 markets are expected to see a slowdown in price growth of 1 percentage point or more, with Lakeland, Fla.; Durham, N.C.; and Jackson, Miss. undergoing the biggest downshift.
Fewer homes, fast-moving markets
The inventory of homes available for sale currently is down an average of 11 percent year over year in the top 100 U.S. metro markets — and the conditions limiting home supply are not expected to change in 2017. The median age of inventory, or the time it takes a home to sell, currently is 68 days in the top 100 metro areas, which is 14 percent (or 11 days) faster than the national average.
The West will lead the way
Realtor.com expects metro markets in the West to see a price increase of 5.8 percent and sales increase of 4.7 percent, much higher than the U.S. overall. These markets also dominate the ranking of the Realtor.com 2017 top housing markets, making up five of the top 10 markets on the list: Los Angeles, Sacramento and Riverside in California; Tucson, Ariz.; and Portland, Ore.