The housing market is an important part of the United States economy. It’s a good barometer of the economy’s overall stability and has built wealth for many families, which is why even those who don’t currently own a home pay attention to its ups and downs.
Current homeowners thinking about selling will want to be aware of current and upcoming trends to properly time the market and stage their home to appeal to today’s buyers. Buyers interested in either buying their first home or moving should get into the market now if prices are expected to rise.
While there are macroeconomic influences on the housing market local market conditions can vary greatly. Talk to an experienced, local realtor to get their input before deciding to list or buy.
One of the biggest trends in residential real estate going forward will be the buying power of millennials. The older millennials are now between 30 to 37 years old and have started having children and settling down. They’ll be the strongest and largest contingent of buyers for the next few years.
Next year, millennials will account for 45% of the mortgage market as they both enter the market as first-time home buyers and upgrade from first-time homes. Expect to see fierce competition for homes in the lower to middle market price tiers.
Rising Interest Rates and Home Prices
Low interest rates encourage borrowing and promote home ownership. The Fed has kept interest rates low for years after the market crash of 2008 to help the economy recover. However, there’s been talk recently that they might increase rates.
An increase in interest rates signals a strong economy. A strong economy is good for home sellers, overall, though there is typically an initial drop in demand just after a rate increase. Demand can drop slightly after rates rise and as home buyers become comfortable paying more for their new homes. If you’ve been thinking about buying a home but sitting on the fence, you might want to enter the market before rates rise.
The past few years, construction of new homes has lagged existing demand. A lack of new housing stock coupled with high demand from millennial buyers will continue to push housing prices higher. Sellers can expect to receive fewer offers on their homes when prices rise, and their homes might take a little longer to sell.
Technology’s Impact on Real Estate will Increase
Home shoppers today have more data available at their fingertips than ever before. Websites like Zillow have given everyone access to information on recent home sales, the amount of time homes sit on the market, and price reductions. It will be harder for home sellers to justify prices wildly out of line with market conditions.
But home sellers can use technology to their advantage. As it becomes cheaper and easier to use sellers will video tours of homes on the market will become more common. Soon home buyers could view a home using virtual reality, buying properties from around the world before even setting foot in them.
Technology is already being used by many brokerages to streamline the closing process. Buyers and sellers can review and sign all paperwork online in many states, now. This saves time and money, and as the use of technology creates more efficiency in the back end of real estate transactions both buyers and sellers can expect a smoother closing process.
Green Construction and Smart Homes
Millennial buyers aren’t looking for McMansions out in the suburbs. They value quality over a home’s size, and many look at a home’s ecological impact. Smart and energy-efficient appliances will help a home sell, and new construction homes should be built with green concepts in mind.
Home buyers in this demographic want to save on energy costs and feel good about helping the environment, in fact, 72% of older millennials said that they’d pay more for a home with smart features. In response to this demand, 88% of builders are incorporating more green features into new construction. In one survey, builders said that green building represented over 60% of their portfolios.
Buyers Re-Entering the Market
Many of the individuals who lost homes during the housing crisis have begun to re-enter the housing market. Short sales and bankruptcies have started dropping off credit reports, enabling them to buy again. While younger generations kicked off the housing recovery,11.5% of recent sales have been by buyers who lost homes during the crisis.
Having learned their lesson, they’re no longer buying luxury properties or over-borrowing. Instead, they’re sticking to more affordable houses and reasonable mortgage payments. This also makes it easier for them to qualify for a mortgage. The tightened underwriting standards post-crash are here to stay and will continue to impact all home buyers, too.
Clever Partner Agents know the current and coming trends and will help sellers and buyers get the best prices for their properties. If you’re thinking about selling or buying within the next year, reach out to Clever today. Our representatives can put you in touch with a local agent for a free, no-obligation consultation.