Although investors entered 2017 with a lot of uncertainty about what the new presidency would mean for the overall economy, the first half of the year proved successful for U.S. markets. Both stock markets and real estate markets experienced gains during the first half of 2017. With a better understanding of the current economic policies, here are six trends that real estate investors can expect to see from the housing market for the second half of 2017.
New Home Construction
The crash of the housing market in 2008 decimated the market for new home construction. The price of new homes did not recover as well as the price of existing homes. Homebuilders in most of the country had no reason to create additional supply. During the first half of 2017, however, permits for new home construction increased 10% above 2016 and surpassed pre-2008 levels for the first time.
Rising Home Prices
Home prices continue to steadily increase from the lows in 2009. As a matter of fact, the composite Case-Shiller Home Price Index surpassed its 2006 peak levels earlier this year. Home prices gains in the western part of the U.S. outpace the remainder of the country.
Continued Growth of Medium-Sized Cities
The incredible growth of business in major cities such as New York, San Francisco and Seattle has resulted in home prices rising at rates much higher than in other medium-sized cities. As a result, many business and young adults have been seeking out the lower costs associated with locations such as Raleigh, Nashville and Fort Collins.
Inflow of Foreign Investment
It is not just strong regional economics driving property prices higher in cities such as New York, Los Angeles, and San Francisco. Foreign investors are another major force in these markets. Real estate investments in the United States are particularly appealing to Chinese investors looking for a safe investment outside of the Asian markets that will not only preserve capital but also earn an acceptable rate of return.
Although the Federal Reserve started increasing interest rates from the record-setting lows that became common over the past few years, rates are still extraordinarily low according to historical standards. Following a series of rate increases, the Federal Reserve left rates unchanged at its most recent meeting. They hinted at rates to come at the end of 2017 or the beginning of 2018, but buyers will benefit from low rates for the remainder of the year.
Availability of Credit
While it is still unknown what changes could happen to housing and banking policies in the future, mortgage financing is cheaper and easier to get today than it has been in recent years. The FHA continues to lower fees for first-time home buyers, which makes it easier for them to qualify for a mortgage and purchase a home. Also, Fannie Mae and Freddie Mac are increasing the loan limit for qualifying loan purchases. This change will reduce costs and increase the availability of funding for all home buyers.
Overall, real estate investments are expected to continue this trend of strong growth into the new year. Real estate markets in the South and Nashville, in particular, are excellent investment options due to stable economic and population growth. These markets are also affordable options for investors who don’t want to be involved in the high prices and competition associated with larger markets.