This may finally be the year you decide to buy a home.
But before you head to your nearest Landmark Bank to borrow a mortgage, you'll want to keep tabs on the housing market. Even though it's still early in 2017, the following trends are worth following because they may influence how you handle the homebuying process.
1. Higher interest rates
A few weeks before the new year, the U.S. Federal Reserve increased the federal funds rate for only the second time since 2006.
As a potential buyer, this means you should prepare for higher interest rates in the near future. These increases won't occur right away, or be too big, but it's still worth preparing now by saving a little extra money whenever possible. You may also want to focus on improving your credit score so when it comes time to apply for a mortgage, you'll have a better chance of securing more a favorable rate.
2. The market will grow
The U.S. real estate will grow in 2017, which would continue a trend of strong growth since the collapse of the housing market nearly one decade ago.
"The U.S. real estate will continue to grow in 2017."
As such, 2017 will likely be the fastest real estate market on record, even faster than 2016. This means that you shouldn't hope homes remain available for too long. Redfin stated homes will likely spend an average of 52 days on the market.
However, a short time on the market will likely lead to higher home prices. Expect median home prices to increase by approximately 5.3 percent year over year. As a potential buyer, you should use these next few months to budget accordingly and account for higher costs.
Prices are an important factor when looking at homes. It may be tough, but stick with your search to find properties within your budget and don't feel like you need to overspend.
3. Millennials and baby boomers will dominate markets
A surge in home sales will be in part driven by the millennial generation. According to Realtor.com, millennials and baby boomers will fuel market demand for at least the next decade. Both older and younger millennials are reaching points in their lives where they can buy houses.
As for baby boomers, they're expected to make up close to 30 percent of homebuyers this year. Both generations will seek housing in affordable areas.
4. Growth in second-tier cities
Many millennials used to dream of moving to the three largest cities: New York, Los Angeles or Chicago. Yet, home prices and cost of living have led young buyers to consider settling down in smaller cities.
These are the areas that provide a city-like atmosphere but are still affordable. According to Realtor.com, millennial buyers will likely move to Midwestern cities because of affordability. So if you're looking to buy a home, don't limit yourself to major cities that might be out of your price range.
Tips for 2017
While it's still early in the new year, you should gather as much information as possible about market forecasts. This knowledge will come in handy as you prepare to buy a home in the spring or summer, and it may even influence where you'll look for a home.
Before you purchase a home, ensure your finances are in order so you can afford potentially more expensive mortgages (and interest rates).
For more information about smart ways to manage your finances, contact Landmark Bank.
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