Real Estate Economic Expectation 2017 happens every year as we are close to closing out the year, and this year n November 17th I attended the Economic Expectations which is a forecast for the 2017 housing market. Jonathan Smoke Chief Economist for Realtor.com spoke about what we saw in 2016 and if it will continue into the new year. Across the country, job creation has been positive but has been weaker than prior recessions. Jobless claims are also down to our lowest levels since 1973, but our growth rate has been weak over each month due to less manufacturing and energy jobs. Unemployment is at 4.9% nationwide and in Boston, our unemployment rate is 3.2% and like nationwide Boston Job Creation remains positive. which is powering good consumer confidence and job growth in 2017 should continue at the existing rate.
The pace of existing home sales decline in July and Aug, but demand didn’t decline just lack of inventory was the issue. Homes were still be sold at a rapid rate. The first time home buyer allowed the sales market to jump and one suspects this will continue in October but data was not out at the time of presentation. Home prices over the summer were still selling at all-time records. There is a shift happening in the marketplace with an increase of new homes contracts ie new construction homes vs existing home sales. In September new home contracts were up by 30%. Housing starts stalled recently but permits have picked up which points signs we will have more inventory on market nationwide but in Boston, we have the great decline in inventory out of all major markets in the United States. October data showed housing starts are up significantly but we are not near the danger zone of overloading the market nationwide.
An interesting fact was mentioned each month for the last 2 years we have had fewer homes for sale than the prior year. This fact was much worse in October, but the takeaway here is we are selling homes for more money each time which means supply isn’t keeping up with demand. Most Major Markets are seeing longer Days on Market but in Boston, the days on market have sped up by 1 week. Massachusetts has made the list Melrose Massachusetts as one of the hottest zip codes searched on Realtor.com. Other zip codes that made the list were San Francisco, and Denver.
Boston overall gets more than twice the average views of listings on realtor.com. When it comes to affordability we are not in the era where affordability is lost on the real estate landscape, but it is harder for a buyer to own a home especially in the northeast. Boston is a very expensive market so renting has become a more affordable option vs buying and other parts of the country that is not the case. Mortgage rates have been low, but we have likely seen the end of low mortgage rates. The increase will happen, but it will be a slow build. Credit is available for home buyers and hasn’t increased in the last few years, but there are lower down payment options but fico scores have risen, and it is largely due to profit margins being so low that lenders need to be more conservative and TRID (Truth in Lending Act) have increased the cost of processing and servicing the loans. Rates also gave lenders growth in a lower risk when it came to refi market.
Realtor.com showed that 32% of baby boomers 55+ looked at real estate and Generation X and Y( 35-55 years old) they were 55% and Millennials were 66%. Baby Boomers and Millennials are powering the market. The Baby Boomer population have not only affected other parts of the country, but they have left an impact on Boston housing market. Boston population has increased and we have 7% more Millennials than rest of the country. This is largely in part that many Millennials went to college or grad school here and then decided to stay and work here. Generation X has been eclipsed by Millennials and this group is growing. The average age of the first-time home buyer is 32 years of age and 4.4 million will be that ages in the United States in the coming year. Boomers are the second largest population in the buying market and they are creating the most havoc causing the Oh Shift moment. Boomers are in need of retirement homes, senior housing and this will be the trend for the high demand for the next 15-20 years. The number one reason why people bought homes was due to the fact they were tired where they were living. Sellers are staying in homes longer, and reason, why Millennials are buying homes, is due to change lifestyle like marriage or wanting to start a family. Millennials are going at a very fast rate and demand hasn’t been keeping up. Experts expect to see a new sense of urgency with some home buyers wanting to buy before interest rates go up higher. Home Ownership in Boston is not an easy task compared to rest of the country and it’s mainly due to fact prices are much higher and we do not have enough programs to help buyers get out of renting and into homeownership
Some taking away points to think about. What is going on in the city may not be the case in the suburbs. Some Suburbs are seeing 3-6 month supply of inventory especially when the home is priced about 2 million plus. Many Babyboomers who are in the burbs and want to buy in Boston may have to wait till their home sells before they can enter the buying market in Boston and surrounding areas which are bound to affect the market and climate of the market over time if Babyboomers are in fact one of the major driving forces in the market. We are starting to see a shift in the marketplace where buyers are not willing to get into bidding wars so it’s so important for a home to be priced right when it first comes on the market. Demand in Boston housing market is still high, but there might be limits what a potential buyer is willing to offer and seller must keep that in mind. Borrowing money isn’t as cheap as it was prior which means there might be limits what a buyer is willing to do to get their home of their dreams. A seller might want to think about the possible demographic who might be the buyer when thinking about upgrading their home as well since it might help in the value of your home when selling. 2017 Looks like it will be another great year for sellers with some changes that they haven’t seen in past, but it should be a great time for a seller to sell. If you have questions about this blog or thinking 2017 is your year to sell or buy your home I am happy to help. Contact Me