If you're shopping for a house in 2017, don't expect it to be easy.
If you're planning to buy a house in 2017, be prepared for a rough ride. A number of factors are coming together to make buying a house particularly difficult (and expensive). It's predicted to be an especially tough year for first-time homebuyers, who already tend to have a harder time than experienced homebuyers.
Prices are up almost everywhere across the country
As of October 2016, home prices nationwide had experienced a 5.6% year-over-year gain. The Pacific Northwest saw a particularly steep rise, with Seattle showing a 10.7% price increase and Portland close behind with a 10.3% increase.
"With the current high consumer confidence numbers and low unemployment rate, affordability trends do not suggest an immediate reversal in home price trends," said David Blitzer of S&P Dow Jones Indices. Blitzer noted, though, that housing pricing can't continue to rise faster than both incomes and inflation rates indefinitely. That's good news for buyers in future years, but it doesn't bode well for 2017. What's more, President Donald Trump's decision to suspend the reduction in FHA mortgage insurance premiums will raise the payments on government-backed mortgages even higher.
Interest rates are up
The interest rate on 30-year fixed-rate mortgages has risen to 4.17% in early 2017, as opposed to 3.72% in early 2016. The current rate is not exactly stratospheric by historical standards, but the uptick is enough to make it a little harder to get approved for (and to pay for) a new mortgage. This is a particularly big concern for first-time homebuyers, who already struggle to find affordable financing.
Demand is up
The climb in prices and interest rates seems to have many homebuyers thinking, "Grab it now before it gets even more expensive!" According to realtor.com, home listing views in December 2016 were up by 40% to 80% compared to the same time in 2015, despite the fact that December is historically the slowest time of year for home sales. The high level of competition will inevitably make it even harder to buy a house.
Inventory is down
Realtor.com also reports that active inventory on the website was down 11% in December of last year compared to inventory in December 2015. And that's after 51 straight months of already below-normal inventory levels. As a result, 2017 is starting out with the smallest inventory of available homes since the last recession, if not longer.
A perfect storm for homebuyers
Rising demand, coupled with a shrinking supply, is the textbook definition of a seller's market. This is great news for anyone trying to sell their house, but not so good for buyers. If you're looking to buy a house in 2017, allow plenty of time to shop around for a good deal. Also get a mortgage pre-approval early so you'll be ready to buy the second you find the right house.