Per the article by Chris Matthews, writer for Fortune online, rising rates will play a large role in 2017. Because in December of 2016, interest rates were raised for the first time since 2006, and two more increases are projected in 2017. These decisions could potentially lead to an increase in mortgage rates and make it more difficult for potential home buyers to purchase. These concerns, while troublesome to a few can be negated if Chief Economist Nela Richardson is correct. She predicts that there will be a rise, but that it will rise no higher than 4.3% and that is on the thirty-year fixed rate. While that can still be seen as unnerving, it is still a great deal, per Chris Matthews when compared to historical norms.
Potential home buyers can take some comfort in the fact, that per Redfin Richardson also points out that while the rates may rise, mortgage credit will likely be more readily available to a wide audience, this will be due to looser lending standards. She continues to state that the FHA (Federal Housing Administration will likely lower fees that it charges to first-time homebuyers, which is a continuation of a trend that originated under the Obama administration, which lowered fees in 2015. Lastly, in regards to government owned mortgage companies, Fannie Mae and Freddie Mac, they will begin backing larger mortgages for the first time in over a decade, which in turn brings forth an ease for buyers to finance purchases in an expensive market.
2017 brings forth more new homes than previous years. In November of 2016 builders pulled back on their new projects, but now that the forecasted trend in home construction is positive, they are starting those projects back up with vigor. Chris Matthews continues, to state that the average annual rate of new groundbreakings that are reaching the 1.163 million rate so far in 2016, which is 55 up from 2015. They expect 2017 to make an increase greater than that from the previous year due to higher wages, looser credit, and increased demand from buyers.
The Continued Rise of Medium-sized Cities
Top-tier economic cities like New York, Seattle, and San Francisco are seeing property values rise, this is due to the increased influx of people coming to those cities for better and higher paying jobs. This influx has placed a strain on the real estate market because they are unable to keep up with the demand due to geographic constraints, or restrictions impose by the government regulations. Chris Matthews takes it a step further to state, younger people are finding themselves attracted to medium-sized cites for the above-mentioned reason. While he continues to state that the smaller cities due not afford the same job opportunities, they do offer and provide housing affordability. In the past six years, medium-sized cities like Raleigh, North Carolina have seen an increase in the younger population that are looking for cheaper rents and lower asking prices. Chris Matthews tells us that 2017 is surely to follow the trend.
One trend that is helping to drive prices beyond the realm of affordability, per Chris Matthews is foreign buyers that are looking for safe places to store their wealth. He states that, this has only increased as of late, fueled by Chinese buyers looking for wealth storage away from their homeland, where repressive financial policies make it difficult to earn decent returns on savings. He concludes by pointing out that Asian investors have a growing attraction to the United State and Europe. The US and Europe continue to attract growing foreign capital, per Scott Brown.
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