For the majority of this year, the housing market could not get past low inventory levels, which were continuously cited as the main road block to a fully healthy housing market. Next year should be better, according to the newly release forecast from the National Association of Realtors, but it’s going to take time.
During the residential housing and economic forecast session at the 2016 Realtors Conference Expo, Lawrence Yun, chief economist of the National Association of Realtors, and Dennis Lockhart, president and CEO of the Federal Reserve Bank of Atlanta, discussed the 2017 housing and economic forecast, along with the economic conditions that support the housing sector.
“It’s evident that demand and sales slightly weakened over the summer as stubbornly low supply limited buyers’ choices, accelerated price growth and hindered some consumers’ belief that now is a good time to buy a home,” Yun said.
Looking to next year, Yun stated that he think the tight supply and affordability issues affecting buyers in many markets will very slowly but surely start to abate.
Yun predicts that housing starts will jump 5.3% next year to 1.22 million.
However, this is still under the 1.5 million new homes needed to make up for the shortfall in recent years and keep up with the growing demand.
The report added that new single-family home sales are likely to total 570,000 this year and rise to around 620,000 in 2017.
And ready to step into those new homes are Millennials. Both Yun and Lockhart stated that they are optimistic that housing demand will include leading-edge millennial households finally dipping their toes into the market at a growing rate.
“NAR surveys from both current renters and recent buyers prove that there’s an overwhelmingly strong desire among the younger generation to own a home of their own,” said Yun. “The housing market over the next couple of years should get a big lift in demand from these new buyers. The one caveat is it’s essential that there’s enough new and existing supply at entry-level prices for them to reach the market.”
According to Yun’s forecasts for next year, existing-home sales are projected to grow roughly 2% to around 5.46 million, and then experience a more prominent jump of 4% in 2018 (5.68 million).
The national median existing-home price is expected to rise to around 4% both this year and in 2017, and by the end 2017, Yun said he expects rates to be around 4.5%.
As for the rest of 2016, Yun added that he expects existing-home sales to finish at a pace of about 5.36 million – the best year since 2006 (6.47 million).
“The gradually expanding economy, multiple years of steady job creation and mortgage rates under 4 percent all contributed to sizeable interest in buying a home this year,” Yun said.