2017 is already off to an interesting start in the global real estate market and the forces of demand and supply are building up momentum that will determine the pace of the markets this year. In the UK, home prices ended up 7.2% in 2016 in contrast to the prevailing fears that the UK housing market will suffer a post-Brexit crash after London recorded weakness in house prices. Now, many housing market analysts think that the UK housing market has survived the worst ; hence, they believe that 2017 could be a bullish year in the real estate markets.

The United States also had its version of a Brexit vote in the surprise victory of Donald Trump in the U.S. presidential elections. Many people had expected the U.S. economy to crash in the 'unlikely' event of Trump's victory but such gloomy outlooks turned out to be false as major U.S. market indexes made new highs. This post explores four major trends that you can expect from the U.S. housing market in 2017.

New home constructions could spike

In 2015, the average annual rate of new groundbreaking in the United States was 1.108 million. In 2016, data on average annual rate of new groundbreaking showed a decent 5% increase to 1.263 million. In 2017, the trend of an increase in new home constructions will most likely continue at a faster pace because builders have more reasons to be positive about the markets going forward. The fact that lenders will lower their qualifying requirements and an increase in demand in the housing market could give new home constructions a boost.

Mortgage rates could rise

It doesn’t take much technical or fundamental analysis to deduce that U.S. mortgage rates will rise in 2017. The U.S. Federal Reserve finally succeeded in its plan to raise interest rates in December 2016 and it plans to increase the rates by three more quarter-percentage points this year. Increases in mortgage rates will one of the resultant effects of the fed rate hike.
Some of Trump's proposed economic policies could also push mortgage rates higher going forward. In fact, Michael Fratantoni, Chief Economist at the Mortgage Bankers Association observes that "Mortgage rates have continued to move higher in the post-election period, as investors worldwide are looking for increases in growth and inflation, with the 30-year mortgage rate reaching its highest weekly average since the beginning of 2016."

Homeowners could get improved access to credit

Nonetheless, the increase in mortgage rates would not necessarily make it harder for qualifying borrowers to get access to credit for their homes. In contrast, the increase in rates could make it much easier to access mortgage credit because volume applications for loans will reduce. In fact, you can reasonably expect lenders to start lowering their fees especially for first-time homebuyers in order to build up demand in the housing market.

Foreign buyers would invest more

Asian investors are moving their wealth to North America and Europe and a great deal of that wealth often ends up in the U.S. real estate market. In the last couple of year, home prices (especially for luxury properties) have been creeping up in markets such as Los Angeles and New York. One of the major drivers of the increase in home prices are buyers from India and China who are looking for safe haven for their wealth.

The Chinese economy is slowing down and Beijing is adopting a tougher stance against ostentatious wealth. In India, the Modi administration is waging a serious war on 'corruption' and a large number of wealthy Indians are caught in the crosshairs. Hence, it isn’t any surprising that Asian investors are stashing their wealth away in U.S. real estate markets in order to escape stifling financial policies.

By Nicholas Kitonyi

Copyright © 2016 Nicholas Kitonyi - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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