The past year has shown us a multitude of trends in the housing market—higher home prices, housing shortages, developer confidence and rising rent prices. For 2017, we’re thinking three things: locations, appreciation and interest rates.
Urban areas are appreciating much faster than suburban areas, accounting for growth, and small homes have seen much sharper price growth than larger ones. Nationally, home prices are expected to keep rising by 3.5% according to Moody’s Analytics projections. If you have a smaller home in, say, a downtown area, your equity is going to take you further. As home prices rise, more buyers will inevitably move to the suburbs to find affordable housing.
If you’re looking to trade for a larger home, you’re in the market’s sweet spot, and the first part of 2017 is going to be the best time to strike for that. The equity from your small house will get you more—the average price on a two-bedroom house climbed 59% nationwide, while four-bedroom houses rose by about 41%, according to more of Moody’s Analytics. Developers have also continued to add new inventory to the market by building new supply in demanded areas with price points between $500,000 and $750,000. So, if you’re selling a smaller home in the first part of 2017 for an upgrade, you’ll want to choose higher priced offers over offers with quicker closing times. The more cash you have to put towards that down payment, the better off you’ll be.
Following the housing market crash, mortgage rates remained at record lows for years. Rates are expected to rise to more normal levels, levels seen before the market crash. The Federal Reserve has already indicated that three more increases to its benchmark rate are coming in 2017. It’s only advantageous to act sooner rather than later if you’re thinking of buying or selling, especially since future housing policies remain unclear.