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2017 Real Estate Update

Date: 2/1/2017

Author: Real Estate Hotline


According to the National Association of Realtors (NAR), uninterrupted job gains and hope that the best is yet to come in 2017 are igniting consumer confidence across the country, and especially in rural and middle America.

In NAR’s ongoing quarterly Housing Opportunities and Market Experience (HOME) survey. Respondents were asked about their confidence in the U.S. economy and various questions about their housing expectations.

In the first three months of 2017, the share of households believing the economy is improving soared to its highest share in the survey’s five-quarter history (62 percent), which is up from 48 percent in March 2016.

In an extraordinary reversal from previous quarters, NAR Chief Economist Lawrence Yun says the surge in positive sentiment about the economy is primarily from respondents living in the Midwest (67 percent) and rural areas (63 percent). Last March, only 49 percent of Midwesterners and 35 percent of those living in rural areas thought the economy was improving.

“Confidence levels generally rise after a presidential election as the nation hopes for the best. Even though it is a highly polarized country, consumers for the most part have upbeat feelings about the economy right now,” he said. “Stronger business and consumer morale typically lead to even more hiring and spending, which in turn encourages more households to make big decisions like buying a home. These positive developments would be especially good news for prospective homebuyers in the more affordable Midwest region.”

Higher confidence in the economy is also translating to better feelings about households’ financial situation. Respondents’ confidence that their financial situation will be better in six months jumped to its highest reading in the survey, climbing to 62.6 in March from 59.8 in December 2016. A year ago, the index was 58.1.

Most households believe now is a good time to buy a home. However, confidence continues to trickle backwards among renters. Fifty-six percent of renters said now is a good time to buy, which is down from a year ago (62 percent).

“Inventory conditions are even worse than a year ago, home prices and mortgage rates are on an uphill climb,” added Yun. “These factors are giving many renter households a pause about it being a good time to buy, even as their job prospects improve and wages grow. Unless there’s a significant boost in supply levels, these constraints will unfortunately slow or delay some prospective buyers’ pursuit of purchasing a home.”

Led by the West, more homeowners view selling favorably right now. Sixty-nine percent of homeowners think now is a good time to sell, which is up from last quarter (62 percent) and a year ago (56 percent). Continuing the trend over the past year, those in the

West continue to be the most likely to think now is a good time to sell (77 percent), while also being the least likely to think it’s a good time to buy (61 percent).

NAR President William E. Brown, a Realtor® from Alamo, California, says homeowners looking to trade up or move down this spring could find themselves in a tricky spot without careful planning. “Demand far outpaces supply in many parts of the country right now, which means homeowners will likely sell their home much quicker than the time it takes to buy another,” he said.

Steered ahead by strengthening demand in smaller markets, the commercial real estate sector should also remain on stable ground in 2017 and offer decent returns for investors.

The apartment sector is expected to preserve its status as a top performer this year simply because ongoing supply and affordability challenges are keeping the nation’s low homeownership rate from seeing meaningful improvement.

Realtors® are increasingly citing inventory shortages as their top concern as the pace of new projects slows in large cities and middle-tier and smaller markets see a growing appetite for space.

“The positive direction for commercial real estate this year will be guided by the steadily expanding U.S. economy, which has legs to grow and continues to be one of the top economic performers and safest bets in the world,” concluded Yun.

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