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Home Sales Expected to Improve in 2017, but Some Headwinds Still Remain
WASHINGTON (April 3, 2017) --Existing-home sales are expected to be higher next year and prices will remain at a healthier level of growth that benefits both buyers and sellers, according to an economic forecast at a residential forum during the 2014 REALTORS® Conference & Expo.
Lawrence Yun, chief economist of the National Association of REALTORS®, was joined onstage by Mel Watt, Director of the Federal Housing Finance Agency, who discussed issues preventing consumers from becoming homeowners, and Julián Castro, Secretary of Housing and Urban Development, who kicked off the forum with a video address.
Yun said existing-home sales this year got off to a slow start, but have recently shown stronger growth behind improvements in inventory, slower price gains and pent-up demand.
"The improving job market has consumers feeling more confident, and the rebound in home prices is building household wealth for homeowners and giving them the ability to sell after waiting the last few years," said Yun.
Existing-home sales this year are expected to fall slightly below 2016 (5.1 million) to 4.9 million, and then are forecasted to increase to 5.3 million next year and 5.4 million in 2016. Yun expects the national median existing-home price to rise 4 percent both next year and in 2017.
Despite the forecasted higher pace of sales in the next two years, Yun said headwinds do remain that will likely hold back the housing market from reaching its full potential. Citing NAR's monthly REALTORS®Confidence Index, which has decreased this year while consumer confidence has risen, Yun said REALTORS® are generally optimistic, but certain factors such as inventory shortages in parts of the country and tight lending standards may be playing a role in their recent dip in confidence.
"Multi-family housing starts have rebounded back to normal since the downturn mostly due to the strong demand for renting," said Yun. "On the other hand, single-family housing starts are still lagging as smaller homebuilders continue to face difficulty obtaining construction loans, and some have even gone bankrupt. Single-family construction still needs to increase to alleviate supply shortages and keep up with the pent-up demand."
Yun said renter households have increased by 4 million since 2010 while homeowner households have decreased by 1 million. "The typical homeowner today has a household net worth of around $200,000. Meanwhile, renters aren't benefitting from the rise in prices and are facing annual increases of their own in the form of higher rents."
Housing starts are forecast to hit 1 million this year and reach 1.3 million in 2015, which is still below the underlying demand of about 1.5 million, but should gradually normalize as lenders open their credit box more to builders. New-home sales are likely to total 440,000 in 2017, and increase to 620,000 next year.
In addition to lagging inventory and rising rents, Yun said tight credit standards, an increase in multi-generational households, and student debt are contributing to a decrease in first-time buyers to a low not seen since 1987. He recognized the new credit scoring calculation recently announced by Fair Isaac Corp., or FICO, as a positive for first-time buyers, but added that mortgage insurance premiums are too high in relation to default rates.
On the topic of access to credit, Watt said there are creditworthy borrowers who have enough income to afford monthly mortgage payments but not a large downpayment and closing costs. He said FHFA will offer loans with as little as 3 percent required up front from borrowers. Because downpayment size is not the best indicator of whether a borrower has the ability to repay, the enterprises (Fannie Mae and Freddie Mac) will also evaluate the full financial picture of a borrower, including credit histories and other compensating factors.
When NAR President-elect Chris Polychron asked Watt how to ensure that lenders will offer low down payment loans, Watt said FHFA has made efforts to clarify the rule for lenders and make credit more available, but it will take REALTORS®, lenders and regulators to break down these barriers and get the word out to the public.
Castro added that HUD is committed to doing everything they can to get credit moving again and working with REALTORS® to help responsible Americans achieve their dreams of owning a home.
After negative growth in the first quarter followed by solid expansion the next two quarters, Yun projects Gross Domestic Product to likely close at 2.2 percent this year and increase slightly to 2.7 percent in 2017. He said the good news is that the economy is in no danger of a recession; however, this year will likely mark nine straight years of subpar growth of less than the historical average of 3 percent."
Yun noted positive developments in the labor market this year that should support increased wages, which have barely kept up with the pace of inflation. Job growth is expected to surpass 2.5 million in 2016 and next year.
"The economy finally regained the 8.8 million jobs lost during the downturn and we're starting to see more workers showing a willingness to quit, which usually signals they're becoming more mobile and confident they can find a higher paying job," he said. "Rising wages and the current pace of rising rents would likely persuade the Federal Reserve to raise short-term interest rates, which have hovered near zero for six years."
Yun expects inflationary pressure to force the Fed to raise short-term rates in the first half of 2017. Mortgage interest rates are projected to increase to slightly below 5 percent next year and reach 6 percent in 2017.
"The impact of rising interest rates on affordability will be minimal as long as job creation keeps pace," he said. "Furthermore, if the credit box slowly begins to open up, that will also mitigate the impact of rising rates."
The National Association of REALTORS®, "The Voice for Real Estate," is America's largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.
The National Association of REALTORS®, "The Voice for Real Estate," is America's largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.
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Thinking Of An Open House?
Open House Timeline
Countdown to a Successful
Sale By:
THE PRODUCER$
An inviting open house can put your home on buyers’
short lists. Four weeks before the open house
· Ask your parents to babysit the kids the weekend of the open
house. Then book a reservation for your pet with the dog sitter or
at the kennel. Having everyone out of the house on the day of will
help you keep your home tidy and smelling fresh. Plus, no dogs
and no kids equal more time for last-minute prep.
· Line up a contractor to take care of maintenance issues
your REALTOR® has asked you to fix, like leaking faucets,
sagging gutters, or dings in the walls.
· De-clutter every room (even if you already de-cluttered
once before). Don’t hide your stuff in the closet—buyers will
open doors to size up closet space. Store your off-season
clothes, sports equipment, and toys somewhere else.
· Book carpet cleaners for a few days before the open house
and a house cleaning service for the day before. Otherwise, make
sure to leave time to do these things yourself a couple of days
before.Three weeks before the open house· Buy fluffy white
towels to create a spa-like feel in the bathrooms.
· Buy a front door mat to give a good first impression.
· Designate a shoebox for each bathroom to stow away
personal items the day of the open house. Two weeks
before the open house
· Clean the light fixtures, ceiling fans, light switches,
and around door knobs. A spic-and-span house makes
buyers feel like they can move right in.
· Power-wash the house, deck, sidewalk, and driveway.
One week before the open house
· Make sure potential buyers can get up close and personal
with your furnace, air-conditioning unit, and appliances. They’ll
want to read any maintenance and manufacturer’s stickers to
see how old everything is.
· Clean the inside of appliances and de-clutter kitchen cabinets
and drawers and the pantry. Buyers will open cabinet doors and
drawers. If yours are stuffed to the gills, buyers will think your
kitchen lacks enough storage space.
· Put out the new door mat to break it in. It’ll look nice, but not
too obviously new for the open house.Week of the open house
· Buy ready-made cookie dough and disposable aluminum
cookie sheets so you don’t have to take time for clean up
after baking (you can recycle the pans after use). Nothing says
“home” like the smell of freshly baked cookies.
· Buy a bag of apples or lemons to display in a pretty bowl.
· Let your REALTOR® know if you’re running low on sales
brochures explaining the features of your house.
· Clean the windows to let in the most light possible.
· Mow the lawn two days before the open house.
Mowing the morning of the open house can peeve house
hunters with allergies.Day before the open house
· Make sure your REALTOR® puts up plenty of open-house
signs pointing in the right direction and located where drivers
will see them. If she can’t get to it on the Friday before a Sunday
open house, offer to do it yourself.
· Put away yard clutter like hoses, toys, or pet water bowls
· If you have a fireplace lay fresh logs in the fireplace.
Day Of The Open House
· Put checkbooks, kids’ piggy banks, jewelry,
prescription drugs, bank statements, and other valuables
in the trunk of your car, at a neighbor’s house, or in your
safe. It’s rare, but thefts do happen at open houses.
· Set the dining room table for a special-occasion
dinner. In the backyard, uncover the barbecue and set
the patio table for a picnic to show buyers how elegantly
and simply they can entertain once they move in.
· Check any play equipment for spider webs or
insect invasions. A kid screaming about spiders won’t
endear buyers to your home.
· Clean the fingerprints off the front and glass door.
First impressions count.
· Put up Post-It notes around the house to highlight
great features like tilt-in windows or a recently
updated appliance.
· Remove shampoo, soap, toothbrushes, and other personal
items from the bathtub, shower, and sinks in all the bathrooms.
Store them in a shoe box under the sink. Removing personal
items makes it easier for buyers to see themselves
living in your house.
· Stow away all kitchen counter-top appliances.
One Hour Before The Open House
· Bake the ready-to-bake cookies you bought earlier
this week. Put them on a nice platter for your open house
guests to eat with a note that says: “Help yourself!”
· Hang the new towels in the bathrooms.
· Put your bowl of apples or lemons on the kitchen
table or bar counter.
· Pick up and put away any throw rugs, like the bath mats.
They’re a trip hazard.
15 Minutes Before The Open House
· Open all the curtains and blinds and turn on the
lights in the house. Buyers like bright homes.
· Light fireplace logs (if it’s winter).
· Didn’t get those cookies baked? Brew a pot of coffee to
make the house smell inviting. During the open house .
* Most Important!
Get Out Of The House
And Let Your
REALTOR® sell it!
Potential buyers will be uncomfortable discussing your home
if you’re loitering during the open house. Take advantage of your
child- and pet-free hours by treating yourself to something you
enjoy–a few extra hours at the gym, a trip to the bookstore, or a
manicure.
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