Report Card for 2015
One of the trends that dominated the United States' housing market in 2015 was the demand for bigger houses. According to an article published in the Wall Street Journal, the average size for single-family houses was 2,567 square feet. These statistics were backed by the latest Census data that revealed that homes are now 61% larger than they were a decade ago.
Interestingly, about 31% homes sold in 2015 were bigger than 3,000 square feet, as compared to 17% in 1999. On the other hand, houses smaller than 2,400 square feet had a share of 21% of the market, which was a significant decline from 37% in 1999.
Another article, published in the Economist in August 2016, revealed that although home prices have recovered since the crash of 2007-08, they are still 20% below the peak of 2006. According to an article published by US News, this is because of the lower returns people are receiving on investment in this expensive market.
For example, house prices in San Francisco, San Jose and New York have increased between 300% to 600% in the last 30 years. However, a median home owner in San Francisco earned only $900,000 in this period. The increasing cost of buying and renting in urban areas might bring the sub-urban markets back into the game.
Trends that will Dominate in the Coming Years
1) Buying will Be Preferred Over Renting
The price of property is rising faster than wages in most parts of the country, making it difficult to own a house. However, a report by Zillow shows that rents in the country have gone up so much that buying looks like a more attractive option. When you compare both options, people would be in better position in 70% of the US markets in two years of buying a house than living on rent.
2) Borrowing will Get Easier
According to a report published by Ellie Mae in March 2016, more than three quarters of purchase loan applications in March 2016 were closed successfully, which was an improvement over the two-thirds closed in 2015. The relaxed guidelines from Fannie Mae and Freddie Mac will also make it easier to borrow money. Private investors have also provided an alternative for those who are unable to meet the guidelines of traditional lenders. This is especially useful for those looking to make profits through flipping homes, according to a blog post by First Equity Funding LLC.
3) Remodeling will Be on Priority
The 'Remodeling Impact Report: Outdoor Features' by the National Association of Realtors revealed that about 66% owners didn't have the time for lawn/landscaping, 65% didn't have the expertise to do so, 30% considered it a big life event, while about 21% accepted that it looked healthy for the sale of a home. However, the fact is that curb appeal has been and always will be one of the aspects that ensure a good price for a property.
4) Generation Z Will Grab the Headlines
The millennial generation will be celebrating its 18th birthday in 2017 and is not far from entering the market. However, their buying habits are expected to be very different from that of their predecessors. They will have better earning jobs, low interest rates and higher ambitions. A majority of this generation is expected to want to own a house and sellers will look to tap into that.
5) The Trump Effect
Data released by the US Department of Commerce suggests that professional, scientific and technical services were the largest contributors to economic growth in 2014, with growth of 4.2% and a contribution of 0.29 percentage points to the nation’s GDP. On the other, real estate grew 1.5%, which was a decline from the previous year and contributed 0.20 percentage points to the GDP growth.
If President Elect Trump's economic-growth plans ignite inflation, there is a risk that interest rate hikes would occur at a faster rate than seen in recent years. However, his housing and mortgage policies are being considered good for the long-term, which should create a strong home-buying environment in 2017.