The new year ushered in a variety of changes for the United States. With a new administration and a generally healthy economy, 2017 poses unique challenges as well as attractive opportunities for people who are aiming to buy a home. Whether thinking about buying a home for the first time, moving to a new city, or downsizing, it benefits the process to be educated on the current real estate climate.
Here are 7 home buying trends that may affect your plans on purchasing a house in 2017.
1. Credit Standards are Loosening Up
After the mortgage meltdown in 2008, lenders tightened credit standards to a never-been-seen-before point. The credit score needed to buy a home during that period rose significantly, and buyers with even mediocre credit had little chance of securing a loan.
This reality is changing, and will, more than likely, have a significant impact in 2017. Certain loan programs are more accommodating to those consumers whose credit scores are under 700. In addition, the new "trended credit data" is being used to more accurately analyze people with thin credit files. Trended credit data is a record of how consumers pay their revolving debt every month. Those who pay their balances in full every month get credit for being 'transactors' instead of leaving a balance.
These changes in credit are a wide-reaching trend that may benefit a large number of potential home buyers in getting into the house of their dreams.
2. Boomers are Downsizing
The Baby Boomer generation has influenced the economy in a variety of ways. As they are aging, Boomers are beginning to downsize in large numbers.
A smaller home offers key benefits that aging adults find appealing. One floor homes are easier to navigate, property taxes, insurance, and utilities are generally less expensive, and they generally are less expensive when compared to larger homes in the same area. Boomers living in retirement may find all of these aspects attractive.
This home buying trend may make things more competitive in the smaller sized home market, and this may be the case for the next several years as Boomers move into and through retirement.
3. Millennials are Buying
As the largest generation today, most Millennials have opted out of home buying market. In 2017, however, they are expected to jump into the home buying market. Realtor.com predicts that this generation will make up 30% of home purchases.
The slowly improving economy of the last few years played a large role in Millennials not pursuing home ownership, as did large student loan debt. In addition, many in this generation saw others lose their homes in foreclosure during the financial crisis. They also liked or needed more mobility than past generations craved. All of these reasons built a good case for veering off the traditional home buying track.
2017 possibly brings a stronger economy, where Millennials are more likely to have higher paying, stable jobs. They are aging, with the youngest being twenty, and the oldest in their mid thirties. The time is right for Millennials to see a "sold" sign on their future home.
4. New Home Construction is Increasing, but Not Enough
New home build rates are still suffering from the real estate bubble, and is not keeping up with demand. The new home build rate is still at only 60% of the normal average annual rate.
Unfortunately, the lack of the homes being built may end up driving prices higher, as well as causing stiff competition. Buyers in the market for a newly built home in 2017 need to be ready to go when they find one they like.
5. Sales Cycles are Decreasing
With Millennials and Boomers in the real estate market, and new builds still at low levels, sales cycles may be decreasing. With a larger number of consumers shopping for homes, buyers in many areas must be ready for swift and intense negotiations to secure the house they want. Homes for sale are less likely to be on the market than they were five years ago.
It pays hopeful home owners to get pre-qualified for a mortgage, and have a plan in place to be attractive to the seller. As mentioned above, taking too long to think it over may leave you out in the cold in 2017.
6. Mortgage Rates are Rising
The days of historically low mortgage rates are disappearing fast. Rates are inching higher, and will most likely continue to do so through 2017. This is one of the home buying trends that is challenging for shoppers with serious budget boundaries, and some may decide to buy this year to avoid any further increases. Even a half a percentage higher can make a significant difference in a home owner's monthly payment.
Consumers shopping for a home this year should be prepared for a higher mortgage interest rate, though the good news is that, compared to the last fifteen years, mortgage rates are still some of the best the market has offered.
7. Smaller Homes get Hotter
This trend shows that bigger isn't necessarily better. For the first time in years, the average size of single families homes is declining.
The tiny house movement, while much-talked about, is only part of this evolution. Many first-time homebuyers want smaller homes that fit in their budget. On the other end of the spectrum, Boomers are downsizing, as mentioned above, and want less square footage than before. This all adds up to less square footage homes flying off the market in 2017.
What Does This all Mean?
These 2017 trends mean that smart home buyers must be prepared. Shoppers should diligently work on bolstering their credit scores, saving up the right amount for a down payment, and getting pre-qualified. These actions make you more attractive to sellers, and the competitive 2017 real estate environment is going to demand it. Even with rising mortgage rates, there is likely to be multiple buyers looking at the home you want. Through education and preparation, you give yourself the edge to come out on top.