All Signs Point To A Strong 2017 Real Estate Market

President Trump would like to stimulate the economy through deficit spending and deregulation. The market has responded by selling off bonds and buying bank stocks.

How will this impact the real estate market?

The bond sell-off has caused interest rates to increase nearly one percent, which increases the cost of a $300,000 mortgage by roughly $250 a month. On the other hand, reduced regulation could increase lending for credit-challenged individuals. Also, potential deficit spending could create new jobs. In this scenario, more credit and jobs could mean more buyers bidding on homes.

It has been an unusual post-inauguration ride, and there is, of course, uncertainty around what the new administration will be able to accomplish and how policy decisions will impact loan programs. While deregulation and deficit spending could keep the real estate market on track or even perform better in 2017, one of President Trump’s first acts of “deregulation” was to sign an executive order to block a mortgage reduction policy for FHA-backed loans — a move that caused concern around the impact on the first-time home buyer population, which was expected to be strong this year.

The National Association of Realtors (NAR) President William E. Brown responded to the action by saying, “According to our estimates, roughly 750,000 to 850,000 home buyers will face higher costs, and 30,000 to 40,000 new home buyers will be left on the sidelines in 2017 without the cut. We’re disappointed in the decision but will continue making the case to reinstate the cut in the months ahead.”

However, the fear that rising rates and the blockage of stimulus policies, such as the mortgage reduction policy for FHA-backed loans, would keep potential buyers on the “sidelines” has thus far been unfounded.

Certainly, numbers show that people have not stopped entering the real estate market. Total existing home sales jumped 3.3 percent in January from December 2016, according to the most recent report from NAR.

The positive jump in existing home sales aligns with the sentiment coming out of this year’s Owners.com survey that consumers are dedicated to home ownership. The survey finds that consumers are more than willing to sacrifice on other financial goals to buy a home.  For example, most consumers indicated that saving for a home takes priority over saving for an emergency (61 percent) or contributing to their retirement (60 percent).

In a nutshell, while it’s too early to tell how the new administration will fully impact the real estate sector in the coming months and years, the housing market continues to remain strong on a national basis. Economic growth, consumer confidence, employment and credit expansion have helped offset higher interest rates and a changing regulatory environment. Those positive indicators coupled with people’s willingness to make financial sacrifices to get into the housing market may continue to keep uncertainty at bay and fuel housing market activity.

Source: Forbes

Filed under: Headlines by Wendy Jackson
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