As the year comes to a close, industry experts are reflecting on the forces that have impacted the 2016 housing market, including a lack of inventory, rising mortgage rates, a surge in home prices, and disinterested millennials. This week, new reports from CoreLogic and the National Association of Realtors (NAR) will reveal recent market changes and what these trends indicate for 2017.
The previous S&P CoreLogic Case-Shiller Indices report, which covered September, reported a year-over-year increase in home prices, which climbed 5.5 percent since 2015 and 5.1 percent from August. The prices of homes in Seattle and Portland increased 11 percent year-over-year, with Miami, Tampa, Phoenix, and Las Vegas also experiencing a growth in home prices.
Ralph McLaughlin, Chief Economist at Trulia, says the rise in home prices garners various reactions, and the increase will only affect homeowners with positive equity. “Home prices reaching their nominal pre-recession peaks brings mixed news for the housing market,” McLaughlin said. “It’s good news for homeowners who are no longer underwater, but not so great news for homebuyers who have seen prices outpace incomes for most of the housing market recovery.”
Will home prices for the month of October continue to increase at the same pace as they did in September or will the pace of appreciation slow down?
As the prices of homes increased, home sales simultaneously ascended according to the previous Pending Home Sales Index from the National Association of Realtors (NAR). The market saw a 1.8 percent year-to-year increase in home sales from 2015 and a 0.1 percent growth in pending sales.
Lawrence Yun, Chief Economist for NAR, states that there was competition among homebuyers due to the lack of inventory available on the market and home price affordability for the month of October.“Low supply has kept prices elevated all year and has put pressure on the budgets of buyers,” says Yun. “With mortgage rates expected to rise into next year and put added strain on affordability, sales expansion will be contingent on more inventory coming onto the market and continued job gains.”
Stephen Melman, Director of Economic Services at the National Association of Home Builders, says the combination of the Home Sales Index, Existing Home Sales report, and Builder Confidence report restores confidence in the residential construction industry. “These reports are good news for new residential construction as the housing recovery continues to address demand among first-time buyers and broadens across a wider range of markets during the balance of 2016 and into 2017.”