2017 expected to be bright year for US housing market

    The housing market is expected to pick up moderately this year on steady job and income growth and an easing supply crunch, but rising mortgage rates are likely to temper the gains, economists tell USA Today.

    The “X” factor is President-elect Donald Trump. Some of his proposed policies could juice home sales and starts more than anticipated while others may constrain the market.

    “We think 2017 is going to be another solid year” for housing, says Ralph McLaughlin, chief economist of real estate research firm Trulia. “But homebuyers will continue to face headwinds.”

    Existing home sales are projected to increase 2% to a post-recession high of about 5.5 million in 2017, says Lawrence Yun, chief economist of the National Association of Realtors. But that’s less than this year’s 3.3% gain and below the 5.75 million considered normal in light of population growth.

    Among the chief stumbling blocks is the rise in mortgage rates. Since late October, the average 30-year rate has climbed from 3.47% to 4.32%, boosting the monthly payment on a $200,000 mortgage by $97. Yun estimates the rate will increase to about 4.6% by the end of 2017, adding another $34 to that monthly mortgage check.

    Rates are rising in anticipation of higher inflation under Trump’s fiscal stimulus plan and faster interest rate hikes by the Federal Reserve.

    McLaughlin notes that with rents soaring in recent years, owning a home is still a far better deal than renting in most of the country. But as mortgage rates edge higher, Yun says some low- and moderate-income buyers will no longer qualify for a loan.

    “People at the margins (will be) priced out,” he says. He estimates the increase in rates over the next year will mean 400,000 fewer home sales than if borrowing costs were flat.

    USA Today has the full story.

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