Thursday, December 8, 2016

10 of the Hottest Real Estate Markets for 2017


We’ve predicted a slight slowdown for the US Real Estate market next year, but the realtor.com economic team is forecasting that most of the nation’s hottest markets are going to keep blazing in 2017. And where will it be hottest? Head west! According to our forecasts, the western U.S. will continue to lead the nation in prices and sales.
“The top 10 markets all benefit from strong growth dynamics: population, jobs, and households,” says Jonathan Smoke, realtor.com’s chief economist, who analyzed the country’s 100 largest metropolitan markets for their growth potential. “They all have low unemployment that’s heading lower, which buoys consumer confidence.”
Western cities account for 11 of the top 25 metro markets on our list, including five in California. But whatever their location, all the top markets have in common relatively affordable rental prices, low unemployment, large populations of millennials and baby boomers, as well as a high number of listing views on realtor.com. The top 10 are forecast to see average price gains of 5.8% and sales growth of 6.3%, exceeding next year’s anticipated national growth of 3.9% and 1.9%, respectively.


And while the limited availability of homes for sale continues to be a problem for home buyers but a boon to homeowners, these markets are seeing growth in new construction that eases the supply shortage somewhat. Still, there isn’t enough new construction to keep up with the growth, Smoke says—and so prices continue to rise at above-average rates.
However, compared with last year, price growth in eight of the top 10 markets is expected to slow down, with only Los Angeles and Tucson, AZ, showing bigger increases over last year.
For all their commonalities, the top 10 metro markets have different buying patterns and price levels, Smoke notes. Millennials are more of a buying force in Boston and Los Angeles, while retiring boomers make their presence felt in Phoenix; Jacksonville and Orlando, FL; Raleigh, NC; Tucson; and Portland, OR. Veterans, meanwhile, come out in force in Jacksonville and Tucson.
See metrics for the top 20 markets below, and for the full list of 100 markets, check out the 2017 Housing Forecast:

RankTop MarketsMedian PricePrice GrowthSales Growth
1Phoenix, AZ$300,0005.94%7.24%
2Los Angeles, CA$675,0006.90%6.03%
3Boston, MA$480,0006.09%6.32%
4Sacramento, CA$420,0007.18%4.92%
5Riverside, CA$350,0004.98%6.88%
6Jacksonville, FL$284,0004.79%7.03%
7Orlando, FL$272,0005.69%6.10%
8Raleigh, NC$312,0004.16%7.55%
9Tucson, AZ$237,0006.10%5.47%
10Portland, OR$420,0006.55%5.02%
11Durham, NC$320,0002.55%8.95%
12Colorado Springs, CO$335,0004.77%6.71%
13Jackson, MS$207,0001.98%9.44%
14Detroit, MI$195,0005.17%6.22%
15San Diego, CA$620,0006.47%4.89%
16Salt Lake City, UT$345,0006.66%4.67%
17Deltona, FL$260,0003.10%8.23%
18Provo, UT$334,0005.16%5.84%
19Austin, TX$385,0003.50%7.40%
20Seattle, WA$430,0007.36%3.41%

Friday, December 2, 2016

5 Trends That Will Dominate Real Estate in 2017


We won’t pretend to know everything that 2017 will bring—heck, 2016 sure surprised us—but we’re pretty certain there will be changes. A lot of them. And while the surprise triumph of Donald Trump in the presidential election won’t alter the fundamentals shaping the 2017 real estate market, its impact is already being felt.
We’ve seen interest rates jump since the election, a movement that’s likely to affect the youngest generation of home buyers.
Just like last year, realtor.com®‘s economic data team analyzed our market data and economic indicators to come up with a picture of the key housing trends for 2017. As we prepare to bid farewell to 2016, it looks like we’ll be saying goodbye to the last of the record-low interest rates of the past few years, too. Interest rates have shot up 40 basis points, or 0.4 percentage points, since Trump’s election.
And that’s significant, especially for first-time home buyers, including many millennials.
“With more than 95% of first-time home buyers dependent on financing their home purchase, and a majority of first-time buyers reporting one or more financial challenges, the uptick we’ve already seen may price some first-timers out of the market,” says Chief Economist Jonathan Smoke, who pulled together the realtor.com 2017 housing forecast.
According to the forecast, the 2017 national real estate market is predicted to slow compared with the past two years, across the majority of economic indicators studied.  But maybe “slowdown” isn’t quite the right description.
“I would characterize our 2017 forecast as a moderation, as opposed to a slowdown,” says Smoke. “The pace of growth is still strong and, for pricing, still represents an above-average level of appreciation.”
Smoke says we’re mostly reverting to normal prices, after years of appreciation as the housing market recovered from its 2008 crash.
Recovery is good, but the flip side is that pricing is tougher for consumers, Smoke points out.
“Throw in higher mortgage rates, and it becomes more challenging to be able to afford homes compared to what it was over the course of this recovery,” he says.


Here are some of the key predictions for 2017:

1. Millennials and boomers will move markets

In 2017, the U.S. real estate market will be in the middle of two massive demographic waves that will power demand for at least the next 10 years.
Millennials and baby boomers, the two largest American generations in history, are both approaching life stages that typically motivate people to buy a home: marriage, having children, retirement, and becoming empty nesters.
Smoke predicts that millennials will make up 33% of buyers in 2017, lower than his original estimate due to those increasing interest rates.

2. Millennials will look to the Midwest

While the financial picture may look grim for our youngest home buyers, the Midwest, with its affordable cities, still looks good. We believe Midwestern cities will continue to beat the national average in terms of its proportion of millennial home buyers in 2017. Leading the pack are Madison, WI; Columbus, OH; Omaha, NE; Des Moines, IA; and Minneapolis.
“It’s easier for millennials to buy in more affordable markets like in the Midwest,” Smoke says. “We’re also seeing large numbers of millennials buying in Midwestern markets with or near big universities. So part of this is an effect of recent graduates with good jobs being able to settle down in these more affordable markets.”

3. Price appreciation will slow down

Nationally, home prices are forecast to slow to 3.9% growth year over year, from an estimated 4.9% in 2016.
“Prices are still likely to go up at an above-average pace as long as supply remains so tight,” Smoke says. “The inventory problem is not going away.”
Of the top 100 largest metros in the country, 26 markets are expected to see price acceleration of 1 percentage point or more, with Greensboro, NC; Akron, OH; and Baltimore experiencing the largest gains. Likewise, 46 markets are expected to see a slowdown in price growth of 1 percentage point or more, with Lakeland, FL; Durham, NC; and Jackson, MS, undergoing the biggest downshift.

4. Fewer homes, fast-moving markets

The inventory of homes available for sale is currently down an average of 11% year over year in the top 100 U.S. metropolitan markets—and the conditions limiting home supply are not expected to change in 2017. The median age of inventory, or the time it takes a home to sell, is currently 68 days in the top 100 metros, which is 14%, or 11 days, faster than the national average.

5. The West will lead the way

We’re expecting metropolitan markets in the West will see a price increase of 5.8% and sales increase of 4.7%, much higher than the U.S. overall. These markets also dominate the ranking of the realtor.com 2017 top housing markets (more on that tomorrow), making up five of the top 10 markets on the list: Los Angeles, Sacramento, and Riverside in California; Tucson, AZ; and Portland, OR.

Tuesday, November 15, 2016

5 Real Estate Trends to Watch in 2017


A surprising twist toward the end of 2016 with the election of real estate magnate Donald Trump as president is likely to presage some dramatic changes in 2017 for the housing industry, which saw healthy increases ion values this year, thanks to factors including low interest rates, lower gas prices, stronger wage growth and millennials getting off the fence and entering the market.
Still, as demonstrated by the Nov. 8 presidential election, anything can happen. Here are five things to watch for in real estate in 2017 — don’t get blindsided:
Attack of the drones



Commercial use of unmanned aerial vehicles (UAVs), or drones, in 2017 has been cleared for takeoff by the Federal Aviation Administration, and the nascent use of drones by the real-estate industry is likely to expand dramatically next year, according to several analysts.
“Location, location, location has now become perspective, perspective, perspective,” said Steve McIrvin, chief executive of Autel Robotics USA, a Bothell, Wash.–based drone manufacturer. “If you have a property [to sell] with more than an acre of land or a unique perspective, it’s a good reason to bring in a drone.”
While the use of drones to create those flyovers of properties for real-estate agents began to rise this year, home buyers and sellers will be able to use them as well by next year, as operators will no longer need a commercial pilot’s license to fly, although they will need the FAA’s permission, along with a filed flight plan.
“I could teach you to operate [a drone] in 30 minutes,” said Tim Nguyen, a San Mateo, Calif.–based business-development manager for China’s DJI, the biggest maker of UAV’s, who said real-estate agents and buyers can use drones to do live postings to social media. “It’s a new way of interacting with clients and buyers from all around the world,” Nguyen said.
The newest drones have built-in redundancy: If an operator lets go of the controls, it simply hovers in place, Nguyen said. Even better straight-out-of-the-box prices for high-quality drones are expected to drop to as little as $500, he added, though drones with higher-end features, including gyro-stabilized platforms, which help steady the video images, will still run $1,000 to $1,200. The smaller gyro-stabilized drones, with the rotors shut off, can also be handheld and walked inside a home to provide steadier images during a video walk-through, he said.
While initially a tool of the selling side, the expansion of drone use in the commercial space means that they now be a tool for home buyers, as well. “Buyers in Seattle are skipping the home inspection because the market is so hot, but that doesn’t mean you can’t get a drone to take a quick look,” McIrvin said. He said he recommends that a buyer who skips the home inspection in a competitive buying situation use a drone to inspect a home’s roof, to ensure that a chimney doesn’t have cracks, or to circle the house if access isn’t available.
Not ‘mixed-use’ but ‘surban’

There’s been plenty written about the move from suburban-style sprawl — marked by McMansions and strip malls — to more dense communities of different housing arrangements, such as town houses, apartments and single-family homes, together in the same neighborhoods. In 2017, look for a new name for it: surban.
“Existing suburban neighborhoods are adding urban amenities so that there’s an environment where people can live, work and play right outside of the core part of the city,” said Peter Burley, a real-estate executive in Oak Park, Ill., an urbanized inner-ring Chicago suburb.
“These developments are more than simply mixed-use,” said Danielle Leach, a senior consultant at John Burns Real Estate Consulting in Chicago, who as a single mom lives in such a community in St. Charles, Ill., with two teen boys. “Surban living is becoming a new way of life for many: where the blend of urban and suburban living provides the best of both worlds,” she said. With surban living, it’s possible to walk to work, like in a city, as well as enjoying pedestrian access to groceries, entertainment and youth- and sport-friendly parks — plus reliably strong public schools.
John Burns Consulting expects nearly 80% of residential growth to occur in surban communities over the next 10 years — up from 71% from to 2015 — compared to just 15% for “urban” areas through 2025.
Surban neighborhoods are designed to be inclusive, rather than exclusive, said Bill Endsley, of the International Real Estate Federation, a Washington, D.C.–based international real-estate consulting group, making them affordable to teachers, firefighters, police and janitors.
“The more we go down the road of exclusive development, the more problems we have,” including traffic congestion, air pollution and sprawl, Endsley said. He cited a rundown mall site in San Jose, Calif., which was turned into “Santana Row,” a booming destination in the high-priced Silicon Valley, that includes affordable housing.
Forget the starter home, millennials want the move-up property

More millennials — roughly, those born between the early 1980s and the late 1990s — are expected to buy a first home in 2017, according to the Washington, D.C.–based National Association of Realtors.
Many of those buyers have saved enough to go with something more than a condo unit or a starter home, said Jessica Lautz, managing director for research at NAR. And with the markets doing so well, and interest rates as low as they are, millennials who have paid down their student debt and built up their cash may be in a position to buy more house than real-estate agents might think, she said.
Indeed, the NAR noted that in 2016, 17% of buyers under 35 were able to save enough for a down payment for a home within a year, compared with 14% of all age groups. And though it was lower than all other age groups, 37% of buyers under 35 said they were able to save enough for a down payment within six months, compared with 46% of all other buyers, the NAR said.
To be sure, student debt still is seen as one of the top factors that will influence, in the coming year, whether the millennial generation will buy a home. The NAR noted that 44% of Generation Y buyers had a student-loan debt balance of at least $25,000. And perhaps also worrisome, the baby boom generation is also deep in debt, with the highest median debt balance of $29,100. And it isn’t just their own debt, according to the NAR. “This may be due to not only their personal educational loans but accumulating debt from their children’s education loans,” Lautz said.
How Trump’s shocking win could change real estate

The conventional wisdom just a few weeks ago foresaw a solid electoral win for former Secretary of State Hillary Clinton and a smooth passing of the baton from the Obama administration, along with a gentle increase in interest rates in December by the Federal Reserve. No more.
Last week in Orlando, Fla., just before most voters went to the polls, Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said only “election turmoil” could force the Fed to hold back on an interest-rate hike in December.
“You can never rule things out post-election,” Lockhart said. “We may end up with enough turmoil around the election to create a different set of conditions,” he said during a news conference at the National Association of Realtors annual convention.
Indeed, fears of recession could grow with a likelihood that Trump would cut government spending dramatically in his first year, and stock-market uncertainty increasing over just how his presidency will begin. As such, another year of low interest rates could be in the cards.
“I don’t believe that there will be any significant changes to interest rates, at least in the near term, since the underlying fundamentals that have led us into a low-interest-rate environment haven’t changed,” said Rick Sharga, executive vice president of Ten-X, formerly Auction.com, a real-estate auction site.
Sharga sees a Trump presidency being good for the housing and mortgage markets in the long term, he said. “He seems committed to bringing regulatory relief — and regulatory certainty — to the financial-services industry, which should make more credit more available to average home buyers who have been locked out of the market by today’s extraordinarily tight credit standards,” he said.
As a result, home buying should remain strong in 2017, which is good news for a market starved of inventory. “This is absolutely a seller’s market and has been for quite some time, and we do not feel Donald Trump’s win will negatively affect the market for those looking to sell,” said Nancy Dennis, a vice president at American Financing Corp., an Aurora, Colo.–based mortgage lender.
Down the road, interest rates could begin rising faster, especially if Trump’s economic-growth plans ignite inflation. “The accelerated economic growth and ensuing inflationary pressure could prompt a quicker pace of rate hikes that are potentially more aggressive than exhibited over the past year,” wrote John Chang, first vice president of research services at Marcus & Millichap MMI, -5.77%   , the largest U.S. real-estate brokerage firm, in a note to investors this week.
Start thinking about Generation Z

The millennial generation might grab all the headlines, but it won’t be long before Gen Z reaches the market. They’re teenagers now, but Generation Z is almost on the cusp of being able to buy homes, with the first Gen Z–ers reaching their 18th birthdays in 2017. Gen Z, according to the National Association of Realtors, is a lot different from the predecessor generation that came of age in the midst of recession, war, terrorism and a stock-market collapse, and was burned by the housing downturn and crushing student-loan burdens.
Gen Z will come of age with low interest rates, better job prospects and higher wages to help cushion the high costs of college education, said NAR research director Lautz.
“It might sound a little traditional, especially when compared to what we’ve seen with millennials, but this is a generation that values homeownership,” said Sherry Chris, chief executive of Parsippany–Troy Hills, N.J.–based Better Homes and Gardens Real Estate.
In fact, 97% of the Gen Z age group wants to own a home, she said. “I want a big house,” said Cayman, a 17-year-old interviewed by NAR. “I want a room for each of my kids, a master bedroom, a few guest rooms, a movie room. I want a lot of space.”

Thursday, November 10, 2016

How President Trump Will Change the U.S. Housing Market


By now everyone on the planet knows that the majority of polls were wrong. Dead wrong! Donald Trump was elected the 45th U.S. president in a stunning upset. And his presidency is expected to have a profound impact on the nation and world.
Sure, everyone right now is obsessing over what kind of impact the new president-elect will have on immigration, taxes, international relations, and trade policies. But we have a more specific query: What will the real estate mogul turned most powerful man in the world mean for the future of residential housing? (We are realtor.com® after all.)
In the short term, probably not all that much.
However, we do know that the incoming president will limit the federal government’s role in the real estate market, as was outlined in the 66-page Republican Platform 2016. So, longer term, the implications of this for home buyers, sellers, and owners could be sweeping.
As for now, “our November elections come at one of the slowest time of the year for sales, so I doubt we will see much disruption to the normal seasonal pattern” of home buying and selling, says realtor.com’s chief economist, Jonathan Smoke. “However, one short-term risk could be if the [election] has a big impact to financial markets that lasts more than a few days.
“About half of voters got what they wanted,” he adds. “If this does impact purchases, it is more likely to be in blue states and not the red heartland.”



Could Trump make the housing market ‘great again’ for buyers?

A Trump presidency could be a boon for home buyers struggling to save up for a hefty down payment.
That’s because he has promised to cut taxes and shrink the number of tax brackets from seven to three. This could, in theory, leave buyers with more money to spend on the homes of their dreams.
And it could give the luxury market, which has been slowing down as of late, a boost, says James Harris, one of the star real estate agents on “Million Dollar Listing Los Angeles.”
“For the high-end, luxury market, it may turn into something very positive,” he says.
But real estate analysts were quick to point out that some of the reforms laid out in the Republican platform could potentially force buyers to plunk down larger down payments or pay higher interest rates. That could be problematic for those without a few extra million dollars in their bank accounts.
“The heart of Republican support—blue-collar, middle-aged workers—are the people who will [be affected] the most,” says Bob Edelstein, co-chair of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley. “It may be harder to get mortgages, and those that will be available will be less advantageous.”

Adios, Fannie Mae and Freddie Mac?

It appears that the Republican Party, now led by Trump, wants to do away with—or substantially shrink—both Fannie Mae and Freddie Mac, although the language in the platform was a bit vague. It referred to the business models of the pair as “corrupt” and allowing “shareholders and executives [to] reap huge profits while the taxpayers cover all losses.”
Trump hasn’t yet provided a replacement plan for the current system, which relies heavily on both Fannie and Freddie.
The Republicans will also stop the FHA from providing taxpayer-guaranteed mortgages to wealthy home buyers. The FHA typically insures loans for low-income, first-time, and other buyers who don’t have enough for a 20% down payment.

Hit the road, Dodd-Frank?

The Republicans have also said they want to repeal—or at the very least, limit—the Dodd-Frank Wall Street Reform and Consumer Protection Act. The act provides more oversight of financial institutions in the wake of the housing bust that plunged the nation into a recession.
Trump’s party also wants to get rid of the Consumer Financial Protection Bureau (or subject it to congressional appropriation). The bureau, created through Dodd-Frank, is charged with protecting consumers against predatory financial services companies, including those providing mortgages.
Dodd-Frank and agencies such as the CFPB are key to ensuring financial markets are kept in check and act fairly, says Edelstein.
However, Republicans allege that its “regulatory harassment of local and regional banks, the source of most home mortgages and small business loans, advantages big banks and makes it harder for Americans to buy a home” in the platform.
Unfortunately, no one at realtor.com has a crystal ball to see into the future of residential real estate under America’s new commander in chief. But it doesn’t look like demand from aspiring home buyers will taper off any time soon.
The election is “going to absolutely create a short-term uncertainty like Brexit,” says Harris. “But in the long run, I think everything will be fine.”

Wednesday, November 2, 2016

20 of the Hottest Real Estate Markets in the US


Think gore-dripping zombies and shrieking ghosts are scary? Well, here at realtor.com®, it’s the terrifyingly low levels of homes available for sale that keep us up at night … and that’s exactly what we’re seeing in an early look at our site’s data for October. Spooky!
Despite prices that are so high they could make your head spin like a possessed child, demand from would-be buyers remains as frenzied as 10-year-olds clamoring for fun-size Snickers on Oct. 31.
OK, enough with the Halloween metaphors already. We’re exhausted! Just know this: Homes for sale in October are actually moving off the market 2% more quickly than they did at this time last year, our data show. It’s more evidence of a bullish real estate market, although one that continues to challenge buyers to find—and get—their dream home.
The median list price of $250,000 is the same as last month, at a time of year when sale prices typically fall. Compared with October 2015, it’s 8% higher, and a new record for October.

Rank
(October)
20 Hottest MarketsRank
(September
)
Rank Change
1San Francisco, CA10
2Denver, CO31
3Vallejo, CA2-1
4Dallas, TX40
5Fort Wayne, IN72
6San Diego, CA5-1
7San Jose, CA92
8Boston, MA2517
9Stockton, CA6-3
10Columbus, OH122
11Modesto, CA110
12Detroit, MI142
13Santa Rosa, CA152
14Sacramento, CA8-6
15Eureka, CA249
16Colorado Springs, CO160
17Fresno, CA214
18Waco, TX10-8
19Nashville, TN190
20Santa Cruz, CA17-3

“We are seeing evidence of stronger-than-normal demand this off-season, as buyers remain eager to make purchases,” says Jonathan Smoke, chief economist of realtor.com. “As a result, the number of homes for sale declined more in October than at any other point this summer, and left us with 11% fewer active listings than last October. That’s the biggest monthly inventory decline since July 2015.”
Smoke’s team analyzed the data to come up with a list of the 20 hottest markets in the country, where homes are in high demand (as seen from listing views by market) and selling fast (measured by days on market).
October’s surprise on the hot list is the Boston metropolitan market, which includes nearby Cambridge and Newton, as well as a bit of New Hampshire. Greater Boston leaped 17 spots up the list into the top 10, and also shaved a full week off its median age of inventory. What seasonal slowdown?
California dominates the list as usual, with 11 markets. Two are new to the list: Eureka and Fresno.