Now that 2016 is in the books, what can you expect from our real estate market in 2017?
Let’s start with mortgage rates. They’ve been quite volatile in the last few weeks and have jumped a full 1% since the presidential election. For most of 2016, they hovered in the 3.5% to 4% range, but in 2017, they’re projected to be in the 4.75% to 5.25% range.
Since these rates directly influence mortgage payments, this kind of increase could be bad news for first-time home buyers. If you count yourself in this category, you have two choices: you can either put down a larger down payment or keep renting. Since the median price in the rental market has increased between 16% and 18% in San Diego the past two years, I don’t recommend this option. If you’re thinking about buying, do it sooner rather than later.
Next, I want to talk about affordability. How much can you afford to pay on a monthly basis? A lot of it has to do with how much you make per month. This has been a problem in our county since the median home price is pretty high and the average income per household hasn’t been able to keep up. We’re hoping that the average income is going to grow in 2017 so that affordability increases. We have a strong economy, so that growth will directly affect the real estate market.
Moving on, let’s talk about home prices. Inventory is still low, which means we’re still in a seller’s market. This can depend on what price bracket you’re in, though. In the luxury market, for example, there is more inventory than in the lower price ranges. Overall, though, we’re sitting between 1.8 and 2.3 months’ worth of inventory, and I think that level will stay low and 2017 will still be a seller’s market.
Some of this depends on whether we’ll have an influx of move-up buyers, but based on the current mortgage rates, that probably won’t happen. It is also unlikely that we will see a lot of new builds, either. Even with President-elect Trump likely to reduce taxes for new builds, that won’t even begin to take place until two years from now.
Lastly, I want to cover home prices. As previously stated, they’re fairly high right now, and I doubt they’ll decrease anytime soon. We have at least 18 to 24 months of growth, and we can probably expect a 3% to 4% increase in median price. This increase will most prominently happen in the spring and summer months when more buyers are searching for homes. This infusion combined with a lack of inventory should naturally lead to a price jump.
Overall, I’m super excited about what 2017 holds. If you have any questions or are looking to buy or sell real estate, don’t hesitate to reach out to me. I hope to talk to you soon.