As the year comes to a close and we begin to look toward the new year, we ask ourselves, what will 2017 hold regarding real estate? From what we can tell now, experiences will be different for buyers and sellers depending on location and segments.
Overall, prices are expected to increase, but at a slower rate than they did this year. Prices rose at a 4.5% rate in 2016 and in 2017 they’re projected to increase 3.5%. Although 1% does not seem like much, it does make a difference. For those who are looking to upgrade to a larger home or ditch their city center condo for a suburban family home, you’re in luck; your equity will go further. Small home prices have been increasing faster than larger homes and urban metro areas have appreciated quicker than suburban outskirts.
In the case of growing families, your time to make a move is now. If you’re looking to exchange your smaller home for a bigger one, the market is in your favor. Over the past five years, the price of a two bedroom home has grown 18% faster than a four bedroom home. Inventory has also increased for homes in the $500,000 to $750,000 range. If you’re looking to sell, this is your chance to walk away with as much money as possible for your next down payment. It would be wise to take the higher priced offer over a swifter close.
On the other hand, if you’re looking to downsize or buy your first starter home, you may need to be more flexible. You will face competition as the market is tight because of low inventory. But the good news is the more flexible you are, the more choices you’ll have. If you are willing to move further from the city center, price per square feet has risen 52% over the past five years compared to 76% at the city’s core. Also, buyers who don’t mind a home that needs a few upgrades can get a better deal. In a recent survey done by Zillow, more than half of home buyers that bought within the last year have purchased a home that needed at least some updates.
If you’re ready to buy, now is the time to do so to lock in a low rate. This year has seen some record low-interest rates that are not expected to last into the next year. Average rates could rise a half a percent in the new year. That is a $1,728 increase in annual payments on a $500,000 mortgage.