So here we are December 2016 PE (that’s post-election) and a lot of people ask me for predictions on where the market is going. I’ll tell you what my crystal ball says for 2017…
Interest rates are going to go up. You may ask, by how much? Well, it doesn’t seem like much unless you’re a buyer whose rate lock is expiring this week and you don’t close until next week . You didn’t think the party was going to last forever now did you? Look, when I was a kid, I remember that my parents talked about double digit interest rates, but I had to look it up to see for myself and wow! Even I was shocked. Mortgage interest rates more than doubled between 1977 and 1981 from 8.72% to 18.45%! Fortunately, my crystal ball tells me it’s not going up that high – at least not by next year, but there is a greater likelihood that the rates will be in the 4’s (4%+) next year.
The graph above illuminates the conundrum for both buyers AND sellers. Why? Look, if you’re selling, the fact is that your buyer can afford less house as prices go up because the bank is going to be making more money per payment. This could put some downward pressure on prices. If you’re a buyer, it means that as interest rates go up, there’s a tradeoff between lattes or neighborhood. Of course, it could help you think a little about your investment strategy too (banks vs. Starbucks)! (Note: I’m not licensed to give advice about stocks. Please do your own research.) 😉 Zillow predicts housing prices will go up by 6.6% through next year. The news is that we’re back to pre-recession pricing levels and I’m seeing that with a lot of houses that I’m running comps on.
Trends likely to continue to put upward pressure on pricing:
- SF Bay Area residents moving here
- Current renters entering the housing market
I really don’t have a crystal ball, but looking at the various economic factors and the current conversations I’m having with buyers and sellers, we’re looking at another strong year here in the real estate market. If you have any questions about the market or want to challenge me on my forecasts, reach me by phone 916-293-1734 or just post a comment! I also am happy to run a complimentary comp for your home, please ask.