Let’s cut to the chase: from the rapid rise of rent prices to the affordability of homeownership, 2016 was a good year for the housing market and new homeowners. But whether you’re looking to get your first set of keys or your next, we think 2017 may leave last year’s housing highlights in the dust and be the best time to buy a home.
And the reasons couldn’t be any clearer.
Hi millennials, meet homeownership.
Seems like no one is talking about this group, right? Just kidding. But there’s a reason for the chatter: millennials are the largest generation of Americans! Defined as those ages 19-35 in 2016, they now total more than 75 million. If you’re among them, here are a few things to consider if buying a home is one of your eventual goals:
- Timing: According to com, millennials are expected to factor big in 2017 homeownership, ratcheting up the competition—and prices—for affordable starter homes in the suburbs. Jonathan Smoke, Chief Economist for Realtor.com, suggests earlier in the year may present a less crowded marketplace and better opportunities. “Those looking to buy may want to consider a winter home purchase in order to avoid bidding wars and higher prices,” advises Smoke.
- Location: Many urban-dwelling millennials will ditch a high-priced, big city apartment for their first home in a smaller city. Why? In order to get the most sought-after design features like high-end finishes and modern floor plans, cities like Raleigh, Austin and Fort Collins offer more affordable options.
- Offset the Cost of a Down Payment: Though 70% of homebuyers aren’t aware of down payment assistance programs, there are about 2,400 programs nationwide that offer homebuyers help with overcoming what : coming up with the down payment.
Growing families should be on the move.
Is your starter home beginning to feel cramped? That’s actually good news! If trading up to a more spacious home sounds like the right move for your family, you’re in the housing market’s sweet spot. Obviously, there are plenty of reasons to upgrade your starter home, but in the interest of being financially savvy, here’s why you may want to strike, particularly early in 2017:
- Better for you as a buyer: Over the past 5 years, the average price of a typical starter home (two bedrooms) rose nearly 60% nationwide, while four-bedroom houses climbed just over 40%, according to . This trend of sharper price growth for smaller homes outpacing larger homes is expected to continue in 2017
- AND better for you as a seller: While fewer smaller homes are expected to hit the market, inventory has risen for more expensive, larger homes. This typically reduces competition and prices. So you’re well positioned on both sides of table.
- Mortgage rates will increase: This could also work in your favor as a buyer. As rates hike, demand will likely decrease and with less competition, your next, bigger home could be snagged for less than it was months prior.
That number could tick down soon.
The Housing Opportunity Index tracks the typical American household’s ability to afford a typical U.S. home. The National Association of Home Builders calculates affordability by determining the median home sale price for an area, identifying the average 30-year fixed rate for the same period, and then projecting the typical monthly mortgage payment. While affordability remains healthy, the trend may indicate future changes:
- Affordability is tracked quarterly, with the first quarter in 2016 marking 65.0% of homes as affordable to median income earners. That number is slowly eroding, with 62.0% and 61.4% in subsequent quarters.
- So what does this mean? Well if you look back at 2012, home affordability averaged 75% nationwide, so many believe this number will continue to decline. As The Mortgage Reports states, “If you’re planning to buy a home this year or next, consider moving up your time frame. Low rates—and increased affordability—may not last.”
Interested in a home, but competition is fierce where you’re looking to buy? Give this a read: 8 Tips for Buying a Home in a Seller’s Market.