2016 was a year of uncertainties and apprehensions. Due to a number of reasons, the volatility in the market was high and the investors as well as realtors were cautious in their dealings. As a result, the inventory in 2016 was extremely low and the prices appreciated beyond reason and logic, at places the rise was steeper than the wage rise! Demand for mortgages was also low.
The market was subdued, to put it mildly. Although it had started with a bang, it ended with a whimper. However, most experts have predicted a robust year ahead. Expectations and predictions aren’t unfounded either.
The 2017 big picture
With some big bang reforms expected and promises of higher infrastructure spend and lower taxation, the number of homes sold and bought should increase. The economy could get a push as discretionary spending and investments would rise. The rate of home sale would increase and the prices may see a further jump although the affordability may also increase.
This year, even the second and third tier cities would see a number of offerings in the market, the growth potential is huge. Millenials would also join the bandwagon as they look for stability and growth.
Mortgage rates may increase: As a result of all the optimism in the financial markets that the new administration in the country could reallocate more budget expenditure to infrastructure, a general optimism is being echoed in the markets. According to Redfin, the mortgage rates could jump to 4.3% from 4%. However, it would stabilize at those rates. With tighter immigration policies and a reformed tax structure, the money movements could start from government bonds to stocks.
More credit availability: With the new administration promising a rollback of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was put in place after the ‘Great Recession of the 21st century’, the credit checks would be slightly less stringent, meaning there would be more loan approvals. This is always better for investors and sellers although one eye has to be kept on the non-performing assets and bad loans.
Inventory issues to continue: Despite all the optimism and positivity going forward, an area of concern will be the lack of affordable homes and high prices that would keep buyers from the middle and lower income strata on the tenterhooks. Still, constructions and new projects will be commissioned in second tier cities. However, foreigners and institutional investors would continue to dominate, meaning the prices would remain steep and affordability would be an issue in the foreseeable future.
Although not everything is as hunky-dory as it looks, the overall market sentiment is positive. Most sellers are expecting a return of growth and action in the market and also the return of all the big bang investments. It will be prudent to wait and watch as the course corrections and policy changes take effect. However, one can confidently rule out a meltdown and expect stability in the long run.