How Economists See the Housing Market of 2017
You may have heard a comment made by Harry Truman about economists. He asked for an economist with one hand because the economist he knew was famous for saying “On the other hand.” With this in mind, I thought we should take a looks at the predictive powers of their scientific approach to the future of the housing market and what it may have to do with your plans to make 2017 the year you will sell your home or the year you will buy a home, perhaps both.
The economists hired by the Mortgage Bankers Association acknowledge that the election of Donald J Trump was a disruptive event that will impact the mortgage market in 2017. Had the Democratic opponent won, the passing of the baton would have created more continuity and that can be translated into a calmer, more predictive marketplace.
How disruptive this election is has as yet to be seen. But the MBa forecast published in November suggests that some people will do better than others in the upcoming year. Interest rates, they suggest, will rise. This may be the result of the loosening of regulations and the increased focus on how taxes are handled at a federal level. This will suggest increased inflation and that will prompt a higher interest rate environment. New buyers will likely pay more for the loan they need. They do not however see the rates on a 30-year mortgage moving much higher than 4.2%.
The Federal Reserve Bank has suggested that they will begin the rate increases soon. There is also some post-election rhetoric suggesting that the FOMC has too much influence in how the markets perform. Whether it does or not, these economists suggest that risk will likely increase and this could have a negative impact on financial markets.
It is unknown how this will impact mortgage originations but this group believes they will be lower in 2017. But if you break out the numbers, separating new loans from refinancing, they predict that new loans will actually increase slightly. This may be due to a change in how businesses are taxed, giving millennial workers more money to spend and hopefully, that will result in more home purchases.
Another interesting statistic suggests that there will be more homes built in 2017 as a result of some of those policy shifts. More homes will mean lower prices. This may point to lower equity assumptions for current homeowners who may be considering selling in 2017 for another property.
The truth itself will not be known for quite some time. If sellers decide to wait, buyers will find fewer homes available, much of the same problem they faced in 2016. If sellers do decide to put their home on the market, the higher interest rates may not allow them to get the price they think they deserve.
These economists do admit that they have little insight on tax, trade, or future government policies. Because they just don’t know, and they do say they may have re-assess all of these predictions, they are offering ‘on the other hand’ as the best current forecast available.
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On behalf of The Jones Group @ Sunriver Realty
Nola Horton-Jones, Principal Broker/Realtor | ABR, C-RIS, e-PRO, GREEN, RSPS, CCIM Candidate
Bryce Jones, Principal Broker/Realtor | ABR, CRS, e-PRO, GREEN, GRI, RSPS, SFR
The Jones Group @ Sunriver Realty | 57057 Beaver Drive | Sunriver, OR 97707
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