10 Housing Markets Where Inventory Is Way Down in 2017

A recent report from Trulia revealed that the number of homes for sale in the U.S. has dropped significantly over the last five years. During the first three months of 2017, inventory nationwide dropped to its lowest level on record.

Housing markets like Salt Lake City, Seattle, San Diego, and Nashville are really feeling the crunch, with inventory dropping by more than 60% since 2012.

Low Inventory Makes Home Buying ‘Season’ More Competitive

In March, the real estate information company Trulia published a report on housing supply in America. Specifically, they looked at the supply of homes listed for sale across the country, and also in the 100 largest metropolitan areas.

Their analysis revealed that the housing markets with the biggest increases in home prices have also experienced significant reductions in the supply of homes for sale. Buyers in these cities and metro areas face stiff competition and often have a harder time finding properties, due to a dearth of inventory.

According to Trulia’s analysis, the number of homes on the market nationwide dropped again during the first quarter of 2017, marking eight consecutive quarters of declining inventory. Starter homes (at the bottom of the pricing spectrum) fell the most, with a decline of 8.7% over the last year alone. The supply of higher-end or “premium” homes was more stable by comparison, with a decline of just 1.7% over the past year.

Related: Home price forecast for 2017

Shrinkage: 10 Cities Where Supply Is Way Down

Here are the ten U.S. housing markets with the largest decreases in for-sale inventory since 2012. The percentage beside each city shows how the number of homes for sale has changed over the last five years.

  1. Salt Lake City, Utah: -69.5%
  2. Seattle, Washington: -66.6%
  3. San Diego, California: -66.5%
  4. Nashville, Tennessee: -66.0%
  5. San Jose, California: -63.5%
  6. Colorado Springs, Colorado: -62.1%
  7. San Francisco, California: -62.0%
  8. Cambridge, Massachusetts: -61.9%
  9. Grand Rapids, Michigan: -61.9%
  10. Tacoma, Washington: -61.6%

Home buyers in these ten housing markets are facing increased competition due to limited supply. The housing inventory crunch in these markets has also boosted home prices. In many of these cities, house values have risen above the peak levels seen during the last housing boom.

According to a related press release: “A strong recovery may be partly to blame for the large drop in inventory some markets have experienced over the past five years. Housing markets — including San Francisco, Seattle, Nashville, and Colorado Springs — which have had greater home value recovery since 2012 have experienced larger decreases in inventory.”

Home prices in Seattle, for example, are currently 12% higher than they were during the housing boom of the early to mid 2000s. In Nashville, another hot housing market with limited inventory, prices are 20% higher than their pre-recession peak.

San Francisco, which has been called one of the most overvalued housing markets in the country, has rebounded even further. Home prices there are about 32% higher than the last peak, according to Trulia’s report.

How to Succeed in a Tight Housing Market

Home buyers in these ten housing markets — and other cities with limited inventory — need to bring their ‘A’ games when entering the market. Competition is high, and supply is low. This is especially true in the “starter home” price range, which is where most first-time home buyers tend to shop.

Here are some tips for succeeding in a housing market with limited inventory:

1. Get a real estate agent. An experienced agent can help you move quickly when the right property comes along, by making a sound offer based on current market conditions. Making a reasonable offer is always important, but even more so in a housing market with limited inventory and stiff competition among buyers.

2. Don’t sweat the small stuff. Going back and forth with a seller over minor inspection issues — or small difference between the asking and purchase price — could put the entire deal in jeopardy. This is especially true in a hot housing market with limited inventory, like the ones listed above. So be flexible. Keep the big picture in mind. Don’t sweat the small stuff. There’s probably another eager buyer right behind you, or several of them.

3. Remember who holds the cards. This an extension of tip #2 above. In a tight housing market, with limited supply and high competition, sellers have most of the bargaining power. That’s real estate reality. Ask for too many concessions from the seller, like a contribution toward your closing costs, and they might skip your offer in favor of the next one. Home buyers should be careful what they ask for in a sellers’ market.

Trump & Housing: President Hammers Middle Class With FHA Insurance Reversal

President Donald Trump, who paints himself as a champion of the middle class, hammers middle-income home buyers with FHA policy reversal.

Within hours of being inaugurated, Donald Trump took a swipe at low-income and middle-class Americans — many of whom voted for him — by scrapping a planned mortgage fee reduction for FHA loans.

In January, then-president Barack Obama approved the reduction, which would have saved FHA borrowers an average of $500 per year. But the mortgage insurance reduction was short-lived. In one of his first acts as president, Donald Trump decided to keep FHA mortgage insurance rates at the higher level.

As a result of Mr. Trump’s decision, home buyers who use FHA loans in 2017 (and possibly beyond) will continue to pay the higher premium, and some will simply be priced out of owning a home.

It was a strange move for a brand-new president who, while on the campaign trail, often painted himself as a champion of the middle class. The Home Buying Institute views Trump’s policy reversal as an error in judgment, and an unnecessary shift given the FHA’s current financial health.

Here’s how we got to this point.

FHA Insurance Fees Were Raised After the Housing Crisis

The Federal Housing Administration (FHA) insures home loans made by mortgage lenders in the private sector. This insurance protects lenders against financial losses that result when homeowners default and stop making their mortgage payments.

The FHA suffered tremendous losses during the housing market collapse and subsequent recession. They paid out so many insurance claims to mortgage lenders that their capital reserves were wiped out.

In order to restore their capital reserves, which are required by Congress to stay a certain level, the FHA raised its mortgage insurance fees starting in 2014. This, along with other policy changes, helped put the FHA back into the black and restored the agency’s capital reserves to the required level.

In 2016, the Department of Housing and Urban Development (HUD) reported to Congress that the FHA’s Mutual Mortgage Insurance Fund capital ratio rose to 2.32%, and that it “exceeded the congressionally required 2 percent threshold.”

HUD and Obama Reduced Fees When FHA Recovered

Now jump ahead to January 2017. During that month, HUD officials, with a blessing from the Obama administration, announced they would reduce the annual mortgage insurance premium home buyers pay when using FHA loans.

The reduced insurance rate would have applied to most borrowers using the program to buy a home in 2017, saving them an average of $500 per year (though sometimes much more than that).

Essentially, HUD and President Obama were bringing the Federal Housing Administration back in line with its primary purpose — to make homeownership more affordable to more Americans, particularly those in the lower and middle income brackets, and those with less-than-perfect credit scores.

But thanks to Donald Trump, the FHA insurance fee reduction never came to pass. This will affect the housing market in 2017 by reducing access to mortgage financing.

Donald Trump Scrapped It Shortly After Taking Office

On his first day in office, Donald Trump halted the planned reduction in FHA mortgage insurance. Trump’s executive order, signed within hours of his inauguration, kept the cost of government-backed mortgage insurance at the elevated level put in place after the housing crisis. In other words, it prevented FHA insurance premiums from dropping back down to pre-crisis levels.

Trump offered no explanation for the move. It happened swiftly and without any fanfare, below the radar of average Americans. Perhaps it was part of his often-touted plan to eliminate “all things Obama.” Maybe it was the brainchild of Stephen Bannon, Trump’s top advisor who wants to dismantle what he refers to as the “administrative state.”

It’s hard to say what the true motivation was, given the current administration’s penchant for misinformation and “alternative facts.”

Trump’s controversial housing market decision could affect a large number of moderate-income and middle-class home buyers in 2017, because the FHA loan program is very popular among this demographic. The Federal Housing Administration backed about 17% of all mortgage loans made in the U.S., according to the most recent figures published by HUD. Most of those were first-time buyers seeking a low down payment (FHA allows for a down payment of 3.5%).

Add to this the fact that home prices have been rising across the country in recent years, and you essentially have a plan for reduced homeownership among the lower and middle income brackets.

According to Laurie Goodman, co-director of the Housing Finance Policy Center at the Urban Institute: “The FHA does a disproportionate amount of loans for first-time buyers, minority buyers, low-income buying; it’s hugely important.”

The National Association of Realtors (NAR) estimated that 30,000 to 40,000 Americans who would have been able to afford a home purchase with the anticipated lower fee will now be unable to buy a house. Another 700,000 to 800,000 buyers will end up paying more for their mortgage insurance than they would have if the Obama-era reduction had been allowed to take place.

The NAR has since lobbied the Trump administration to reinstate the premium cut “as soon as possible.”

It is somewhat ironic that Donald Trump scrapped the insurance reduction. During his presidential campaign, he often lamented about how the middle class in American was getting “crushed.” Why, then, would he sign an executive order to crush them further?

Forecast: Phoenix Home Prices to Keep Rising Into 2018

According to a recent forecast from the real estate data company Zillow, the Phoenix housing market could continue appreciating well into the first part of 2018.

But homeowners in the areas probably shouldn’t expect the kind of home-price appreciation seen over the last year. House values in the Phoenix appear to be rising more slowly in 2017 than they did in 2016.

Phoenix Housing Forecast: Prices Rising Through March 2018

As of March 2017, the median home price in Phoenix, Arizona was just over $200,000 — and rising. The housing economists at Zillow predicted in March that the median home price in Phoenix would rise by 3.5% over the next 12 months (through March 2018). That’s roughly equivalent to the national average for annual housing appreciation going back decades.

As Zillow stated in March: “Phoenix home values have gone up 9.4% over the past year and Zillow predicts they will rise 3.5% within the next year.”

Phoenix homeowners might consider this relatively low forecast a negative sign, but it’s actually a positive. Above-average price increases are generally not sustainable over the long term, especially when they far exceed wage and income growth. Under such conditions, housing markets become unaffordable to an increasing number of residents.

An ‘Overheated’ Real Estate Market?

A February 2017 report by Fitch Ratings suggested that the Phoenix real estate market was “overheated.” According to the report: “home price growth in parts of the western U.S. … is exceeding supporting economic fundamentals. Of particular focus for Fitch are home prices in major metro areas like Dallas, Las Vegas, Phoenix and Portland, which are overpriced by 10% – 14%.”

Related: Marketing for Phoenix real estate agents

Granted, Phoenix is still relatively affordable compared to a lot of other big cities across the country. In fact, the city was recently ranked #7 on a top-ten list of most affordable big cities for U.S. home buyers, by the mortgage information website HSH.com.

Still, the more moderate forecast for Phoenix’s housing market, extending through 2017 and into 2018, is a good sign. It suggests a return to normalcy after years of tumultuous fluctuations. It’s a more sustainable pace for home-price appreciation.

Study: Buyers Need $46,000 to Afford a Median-Priced Home

According to HSH.com, buyers would need to earn around $46,000 per year to afford a median-priced home in Phoenix, Arizona. That’s with a down payment of 20%. If a home buyer puts down 10%, the salary needed to buy a home would increase to around $54,000.

Like home prices, mortgage rates have also risen over the last year or so. On March 9, 2017, Freddie Mac reported that the average rate for a 30-year fixed-rate mortgage loan was 4.21%. That’s up from 3.68% the same time last year. So Phoenix home buyers are currently paying more for houses and for mortgage loans, compared to a year ago.

The bottom line: Forecasts for the Phoenix real estate market suggest that home prices will continue rising throughout 2017 and into the first part of 2018, but at a slower pace compared to last year. According to some economists, this is a much-needed change that could prevent the Phoenix housing market from becoming too “overheated.”

Disclaimer: This story includes housing market and home price forecasts for Phoenix, Arizona, through 2017 and into 2018. These forward-looking statements were provided by third parties not associated with our company. The Home Buying Institute (HBI) makes no claims or assertions regarding future housing conditions.

U.S. Home Price Forecast for 2017: A Return to Normalcy?

A recent forecast for U.S. home prices suggests that house values will rise more slowly in 2017, more closely matching historical averages. This follows a period of above-average gains over the last two years.

According to the real estate research team at Zillow, U.S. home prices rose by nearly 7% in 2016. That’s well above the historical average of 3% to 4% per year, over the last couple of decades.

Portland, Seattle, Dallas and Tampa led the nation in 2016, in terms of home-price increases. According to a January 19, 2017 press release from Zillow:

“Home value appreciation slowed slightly in Portland, but remains the fastest in the nation, up 13.8 percent from last December. Tampa, Seattle and Dallas saw similarly high home value growth, with home values growing nearly 12 percent from a year ago.”

U.S. Home Price Forecast for 2017: Smaller Gains Ahead?

But we probably shouldn’t expect to see such big gains in 2017. The company’s economists have forecast that U.S. home prices will rise by around 3.5% in 2017, which is on par with historical averages.

Call it a much-needed return to normalcy. In many U.S. cities, home-price gains over the last few years have outpaced wage and income growth by a wide margin. This kind of trend leads to housing affordability issues over time. California is a good example of this, though such conditions are certainly not limited to the Golden State.

The truth is that a slowdown in home-price appreciation is a good thing, from an economic standpoint. Slower gains in the housing market will give wages a chance to catch up, or at least to narrow the gap.

According to David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices, home prices cannot outpace income for long, before they being to slow:

“With the current high consumer confidence numbers and low unemployment rate, affordability trends do not suggest an immediate reversal in home price trends,” Blitzer said. “Nevertheless, home prices cannot rise faster than incomes and inflation indefinitely.”

But not everyone agrees on the level of appreciation during 2017. The economists at the real estate brokerage Redfin recently predicted that U.S. home prices would rise by 5.3% during 2017, which would be very close to the 5.5% year-over-year gain they reported for 2016. So it depends on who you ask.

Housing Market Conditions Vary at Local Level

Of course, these are home price forecasts for the U.S. as a whole. Housing market conditions can vary widely from one city to the next, and especially among different regions across the country. So, from a home buyer’s perspective, these trends are best examined at the local level.

Anyone planning to enter the real estate market in 2017 should look at current trends in the city or metro area where they plan to buy. National trends and statistics are not very useful to a buyer.

For example, some cities like Dallas and Seattle are expected to outperform the nation in 2017, where home-price growth is concerned. Other cities might experience little to no appreciation over the next 12 months (Zillow’s home price forecast for San Francisco calls for a gain of only 0.3%, for instance).

The point is, every housing market is different. So home buyers should concern themselves with what’s happening locally.

Disclaimer: This article includes U.S. home price forecasts for 2017. Those projections were provided by third parties not associated with our company. The Home Buying Institute makes no claims or assertions about future housing conditions.

Keller Williams Mid-Willamette Penalized for Illegal Kickback Scheme

Keller Williams Realty Mid-Willamette, a real estate brokerage located in Corvallis, Oregon, has been penalized and fined by a federal financial watchdog for participating in what has been called an illegal kickback scheme.

According to a January 31, 2017 press release from the Consumer Financial Protection Bureau (CFPB), Keller Williams Realty Mid-Willamette (a.k.a., Willamette Legacy, LLC) accepted illegal payments for referring mortgage customers to Prospect Mortgage, LLC, which was also penalized by federal officials.

Accepting payments or “kickbacks” of this nature is a violation of the Real Estate Settlement Procedures Act (RESPA), CFPB officials stated.

Keller Williams Realty Mid-Willamette Violates RESPA

During the course of its investigation, the Consumer Financial Protection Bureau reviewed the mortgage referral activities of the Corvallis, Oregon-based real estate broker Willamette Legacy, LLC, which does business under the name Keller Williams Mid-Willamette.

According to its consent order, the federal agency found the following law violations:

  • As part of some marketing services and lead referral agreements, Keller Williams Mid-Willamette accepted payments (or “kickbacks”) from Prospect Mortgage. These actions violate RESPA rules.
  • The real estate brokerage also provided a “cash equivalent” to its real estate agents when they referred a client to that particular mortgage lender. This too is a violation of RESPA guidelines and requirements.

Among other things, the Real Estate Settlement Procedures Act prohibits “steering incentives,” wherein a consumer is steered toward a certain lender or loan product that may or may not be in their best interest.

Illegal Payments for Customer Referrals

As stated in its news release, the CFPB’s investigation found that Keller Williams Mid-Willamette (and another company, ReMax Gold Coast) accepted illegal payments for referrals to the aforementioned mortgage company.

The consumer financial watchdog has prohibited both companies from further violating the Real Estate Settlement Procedures Act. CFPB stated that the companies must not “enter into any agreements with settlement service providers to endorse the use of their services.”

Keller Williams Mid-Willamette real estate brokerage must also pay $145,000 in disgorgement (the repayment of funds obtained illegally), plus an additional $35,000 in penalties. The damage to the company’s reputation, however, could greatly exceed these monetary penalties.

According to its website, Keller Williams Realty Mid-Willamette has several offices located around Oregon. Currently, the brokerage is led by Staci Barnes (Team Leader) and Dolf Peterson (Principal Reviewing Broker), though these individuals were not specifically named in the agency’s consent order.

Prospect Mortgage Paid the Brokerage $4,250 per Month

According to the Consumer Financial Protection Bureau consent order, Prospect Mortgage initially paid Keller Williams Mid-Willamette $4,250 per month as part of a marketing services agreement (MSA). In exchange for this monthly fee, the real estate brokerage “promised to perform certain marketing activities to help Prospect promote its mortgage lending services.”

The mortgage company reportedly established the $4,250 monthly fee by projecting the average number of lead referrals it expected to receive from Keller Williams Mid-Willamette real estate agents, as per the MSA.

Furthermore, the consent order explained that Prospect Mortgage had designated a specific loan officer (who worked directly out of the Keller Williams Mid-Willamette office but was paid by Prospect) to maintain the illegal kickback scheme.

The loan officer reportedly had regular discussions with the brokerage’s leadership team to discuss the effectiveness of the marketing services agreement. The loan officer would then complete a checklist that summarized the monthly meeting. The checklist noted that Keller Williams Mid-Willamette and Prospect Mortgage “review the capture rate and identify missed opportunities amongst agents and consumers.”

In this context, the “capture rate” refers to the percentage or proportion of the real estate brokerage’s clients (who used mortgage loans) that it “successfully steered to Prospect each month.”

The two organization’s eventually switched to a lead agreement. Under this agreement, Prospect no longer paid the fixed monthly amount to the real estate brokerage. Instead, they paid a variable fee “based on the number of consumers whose information [Keller Williams Mid-Willamette] shared with Prospect.”

Note: The information above is based on an official CFPB press release and consent order, both of which were published on January 31, 2017. For more information on this subject, refer to the Consumer Financial Protection Bureau’s website at www.consumerfinance.gov.

Source URL: http://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-prospect-mortgage-pay-35-million-fine-illegal-kickback-scheme/

FHA Annual Mortgage Insurance to Go Down in 2017, HUD Says

Federal Housing Administration officials announced today that they will reduce the annual mortgage insurance premium for FHA loans by a quarter of a percent.

The lower MIP rate will apply to most borrowers who use the FHA program to buy a home in 2017, and will save them an average of $500 per year. The lower insurance premium takes effect on January 27, 2017.

FHA to Reduce Annual Mortgage Insurance Premium (MIP) in 2017

Rising home values and mortgage rates have put the squeeze on home buyers lately, and have reduced mortgage loan application volume as well. Borrowers who use the FHA loan program have another added cost, in the form of an annual mortgage insurance premium, or MIP.

As a result of rising housing costs, and the added burden of the annual MIP, FHA loan application volume has been on the decline lately. So federal housing officials are making a change to attract more borrowers.

On January 9, 2017, the Department of Housing and Urban Development (HUD) announced that it would reduce the annual mortgage insurance premium for most FHA loans in 2017. As HUD officials stated, this is a modest reduction that “expands credit access and reflects improved economic health of FHA.”

The Federal Housing Administration will lower its annual mortgage insurance premium (MIP) by 25 basis points, or 0.25%. This reduction will apply to most new mortgage loans with a closing / disbursement date on or after January 27, 2017.

The first HUD mortgagee letter of 2017 was sent out to lenders earlier today, with additional details about the annual MIP reduction. To learn more about this FHA program change, refer to HUD Mortgagee Letter 2017-1, which is available online in PDF format.

Here’s a screenshot from the official policy change letter, which shows the current annual MIP as well as the reduced premiums that will take effect later this month. Note the “New MIP” column in this chart.

FHA annual MIP chart

HUD Feeling Good About Agency’s Economic Health

The reduction in FHA annual mortgage insurance premiums reflects the agency’s improved economic health. According to HUD officials, FHA’s Mutual Mortgage Insurance Fund (MMIF) has grown for the last four years in a row. The MMIF was basically wiped out during the last housing crisis, as FHA paid out one insurance claim after another.

Over the last few years, HUD has used higher mortgage insurance premiums and other actions to restore the FHA’s funds. The MMIF has gained $44 billion in value since 2012 and now exceeds the requirements mandated by federal law, according to the latest assessment.

In a related press release, HUD Secretary Julian Castro said:

“After four straight years of growth and with sufficient reserves on hand to meet future claims, it’s time for FHA to pass along some modest savings to working families. This is a fiscally responsible measure to price our mortgage insurance in a way that protects our insurance fund while preserving the dream of homeownership for credit-qualified borrowers.”

Learn more: Do you have questions about the reduced FHA mortgage insurance premium (MIP) rates for 2017? Refer to HUD Mortgagee Letter 2017-1, which was published on January 9th. It’s available on the Department of Housing and Urban Development website and can be found with a Google search.

Mortgage Rate Predictions for 2017 Have Been Revised Upward

The Mortgage Bankers Association (MBA), an industry group, recently increased its mortgage rate predictions and forecast for 2017. This was partly a response to the surge in mortgage rates that occurred during the last few weeks of 2016, and is shown in the chart below.

MBA analysts expect that the average rate for a 30-year fixed home loan will climb gradually throughout 2017, perhaps reaching 4.7% by year’s end. That’s up from a fourth-quarter projection of 4.4% in their previous forecast.

Note: At the time this story was published, on New Year’s Eve, 30-year mortgage rates were averaging 4.32% according to Freddie Mac.

Mortgage Chart Shows Rate Spike at End of 2016

Soon after the U.S. presidential election, mortgage rates in the U.S. began a steep upward climb that was still ongoing when this article was published. You can see this trend clearly in the chart below, which is based on the weekly market survey conducted by Freddie Mac.

PMMS Chart Dec. 29
Mortgage rate trends through December 29, 2016. Source: Freddie Mac PMMS.

This chart also shows why economists and analysts have revised their mortgage rate predictions for 2017. Many forecasts were built on the assumption that 30-year rates would start the new year somewhere between 3.5% and 3.75%, which is where they were a couple of months ago. But they’ve now surged well past that range and have crossed into 4% territory, requiring a new set of mortgage rate forecasts for 2017.

Here are the average rates as of December 31, 2016:

  • 30-year fixed mortgage: 4.32%
  • 15-year fixed: 3.55%
  • 5/1-year adjustable (ARM): 3.30%

So that’s where we are right now. Looking forward, here are some mortgage rate predictions for 2017.

MBA’s Mortgage Rate Forecast for 2017

As mentioned earlier, analysts with the MBA expect that home loan rates will rise gradually during 2017. They are not predicting a huge spike like the one we saw over the last few weeks (see chart above), but rather a gradual upward trend.

Here are the Mortgage Bankers Association’s quarterly predictions for average 30-year loan rates.

  • Q1 2017: 4.3%
  • Q2 2017: 4.4%
  • Q3 2017: 4.6%
  • Q4 2017: 4.7%

So during the first quarter of the new year, they expect 30-year mortgage rates to average 4.3%. That’s where we are right now, at the end of December 2016, which means they expect some rate stability over the coming weeks.

Going forward, the industry group forecasts a steady but gradual rise in mortgage rates throughout 2017.

Of course, these are just predictions. No one can predict future interest rate trends with complete accuracy. In fact, at the end of 2015, MBA’s analysts predicted that rates would rise steadily throughout 2016, and that did not happen (though we did see a spike during the last nine weeks of the year).

The point is, you have to take these mortgage rate forecasts with a grain of salt. They are an educated guess based on current conditions, and nothing more.

A Different Outlook from Freddie Mac?

The economists at Freddie Mac — the government-controlled corporation that buys and sells mortgage loans — seem to have a slightly different view for 2017.

In December 2016, their economic and housing research team issued some predictions for mortgage rates. Based on their quarterly forecast, they expect the average rate for a 30-year loan to hover around 4.2% throughout 2017. Though they did say that “Interest rates will gradually rise as the Federal Reserve continues on its path of policy normalization.”

Again, predictions are a tricky business, especially with the kind of volatility we’ve seen lately. The one thing we can say with certainty is that borrowers will encounter higher mortgage rates at the start of 2017 than at the beginning of 2016. The chart above is evidence of this.

Disclaimer: This story contains mortgage rate predictions and forecasts for 2017. Such statements were provided by third parties not associated with our company. As a general rule, the Home Buying Institute (HBI) makes no claims or assertions about future trends within the housing industry.

Houston, Texas Housing Market Forecast 2017

Home prices in Houston, Texas have never been higher than they are right now, and there’s a chance they’ll rise even higher during 2017. That’s the Houston housing market forecast for 2017, according to a number of real estate analysts, economists, and industry leaders.

Related: Marketing support for Houston mortgage brokers

Houston Housing Market ‘Sprinting Toward 2016 Finish’

In a December 2016 press release, the Houston Association of Realtors (HAR) reported that the median price for a single-family home in the city rose by 8.3% in November, compared to a year earlier. The median climbed to $222,000 last month, reaching its highest point ever (even higher than the last housing bubble). The average price for homes in Houston rose to $281,671 in November, a year-over-year gain of 7.2%.

“It looks like the Houston real estate market is sprinting toward the 2016 finish line, based on the solid numbers in November’s report,” said HAR Chairman Mario Arriaga. “The market has shown tremendous resilience throughout the year in the midst of a struggling energy sector…”

Real Estate Forecast for 2017: Prices Rising More Slowly?

More inventory is coming onto the market, and this could slow the rate of home-price appreciation as we head into 2017. That’s the general forecast for Houston’s housing market in 2017.

Based on current construction trends, many real estate professionals expect the number of homes for sale to increase in 2017 as new inventory comes onto the market.

Mary Piper, director of relocation and operations with Bernstein Realty told the Houston Chronicle: “We feel that the inventory of homes will continue to increase after the new year, with both the election and holiday season behind us.”

HAR also cited inventory gains in its latest market report, saying that home sales were up due to “more plentiful inventory” in the area.

Due to the increased inventory, home prices in Houston could rise more slowly in 2017 than they did in 2016. Rising mortgage rates could also have a cooling effect on the local real estate market next year.

Houston Mortgage Rates Rise Sharply at Year’s End

Houston, we have lift off! Mortgage rates shot up like a rocket in November and December of 2016, reaching their highest level in two years. According to the weekly survey conducted by Freddie Mac, the average rate for a 30-year fixed home loan rose to 4.16% during the week ending on December 15, 2016.

mortgage rate chart 2016
Mortgage rate trends during 2016. Source: Freddie Mac.

The chart above, courtesy of Freddie Mac, shows mortgage rate trends during 2016. You can see the November-December surge on the far right side. So here’s another forecast for the Houston housing market in 2017: Mortgage loans will be more expensive next year.

Looking forward, the Mortgage Bankers Association recently forecast a continued, yet gradual, rise in rates through the end of 2017. In December 2016, the industry group issued the following forecast for the average 30-year mortgage rate:

  • Q1 2017: 4.3%
  • Q2 2017: 4.4%
  • Q3 2017: 4.6%
  • Q4 2017: 4.7%

Granted, this is just a prediction based on current market trends. So you probably shouldn’t “bank” on it. But it does underscore an important point. Both home prices and mortgage rates are expected to continue rising next year.

So home buyers who postpone their purchases until later in 2017 could end up paying more for a house, and for a loan. It’s worth considering.

Higher Loan Limits for Conforming, FHA and VA

Here’s some good news for home buyers and mortgage shoppers. Houston, Texas will see higher loan limits in 2017, for conforming, FHA and VA mortgage loans.

According to a November 2016 announcement from the Federal Housing Finance Agency, the conforming loan limit for a single-family home purchase in Texas will rise from $417,000 in 2016 to $424,100 in 2017. VA loan limits are aligned with the conforming caps, so they’ll also rise to $424,100 next year. FHA loan limits will increase slightly to $331,200.

These changes were made in response to home price gains that occurred during 2016, since loan limits are based on house values.

Disclaimer: This story includes predictions and forecasts for the Houston real estate market in 2017. Such statements are the equivalent of an educated guess. No one can predict future housing conditions with complete accuracy. The Home Buying Institute makes no claims, guarantees or assertions about the Houston, Texas housing market in 2017.

2016 Mortgage Rate Chart Shows Big Surge

On Thursday, December 15, Freddie Mac reported that mortgage rates rose again in their latest industry survey. But that’s just the tip of the iceberg. As shown in the 2016 mortgage rate chart below, home loan rates in three categories have risen for the last seven weeks in a row and are now at their highest point of the year.

If that weren’t enough to light a fire under would-be home buyers, the Federal Reserve recently announced that it would increase the short-term federal funds rate for only the second time in a decade. Indirectly, this could lead to even higher lending rates in 2017. Borrower beware.

Mortgage Rate Chart Shows Late 2016 Surge

Freddie Mac published the 2016 mortgage rate chart shown below earlier today, along with the results of their latest weekly survey of the mortgage industry.

mortgage rate chart 2016
Mortgage rate chart for 2016. Source: Freddie Mac PMMS

If a picture is worth a thousand words, then this chart speaks volumes. A couple of things will jump out at you right away. The first is the large spike in mortgage rates, shown on the right side of the chart. That surge took place over a six-week period that began in mid-November. You’ll also notice that rates are higher today than they were at the start of 2016.

Mortgage rate chart fast facts:

  • The average rate for a 30-year fixed mortgage loan rose three basis points (0.03%) this week to land at 4.16%. That’s the highest it has been since October 2014.
  • It bears repeating: 30-year mortgage rates haven’t been this high in over two years.
  • The average rate for a 15-year fixed home loan rose to 3.37% this week. It is also at its highest point of the year.
  • Borrowers paid an average of 0.5 points (a.k.a. discount points) in order to secure these rates. This is a common strategy used to reduce total borrowing costs over time.

Not surprisingly, the Mortgage Bankers Association reported a drop in home loan applications yesterday. According to their data, total application volume declined by 4% (on a seasonally adjusted basis) last week from the previous week. Clearly, this “new normal” for mortgage rates is pricing some buyers out of the market, and closing the window of savings for homeowners who are trying to refinance.

As we enter 2017, the mortgage industry will have to adjust to the effects of rising rates shown in the chart above.

Rising Home Prices Add to the Urgency

Surely, home buyers are feeling a sense of urgency right about now. The recent surge in mortgage rates has caught everyone’s attention, lenders and borrowers alike. But that’s not the only concern for buyers. Rising home values are creating a “double whammy” situation by further reducing affordability.

In most cities across the country, home prices rose steadily over the last year. And they’re expected to rise further in 2017, though possibly at a slower pace. According to the real estate data company Zillow, home prices nationwide rose by 6.2% during 2016. Looking forward, the company’s economists expect house values to rise by around 3% in 2017.

The message to home buyers is clear: You might want to think about buying sooner, rather than later.

Disclaimer: This story includes a 2016 mortgage rate chart provided by Freddie Mac. This chart shows averages based on a survey of about 125 lenders across the country. Individual loan rates vary based on a variety of factors, including borrower credit scores, the type of loan being used, etc.

Phoenix, Arizona Real Estate Market Forecast for 2017

Home values in Phoenix rose steadily and sharply in 2016, climbing 9% to 11% depending on the source. But 2017 forecasts for the Phoenix housing market suggest that prices could rise more slowly over the next year or so.

In a somewhat contradicting report, the National Association of Realtors made a prediction that Phoenix would be the hottest real estate market in the country in 2017.

Phoenix Housing Market Forecast for 2017

According to the real estate data company Zillow, home prices in Phoenix, Arizona rose by 9.4% from December 2015 to December 2016. This is based on their own proprietary method for measuring median home values.

Be number one

By contrast, house prices nationwide rose by around 6% in 2016. So by this measurement, the Phoenix real estate market outpaced the nation in terms of home-price appreciation.

But what about next year? What’s the forecast for the Phoenix housing market in 2017? According to the research team at Zillow, home prices in the city will rise by around 3.7% during 2017. While that’s a lower level of appreciation than 2016, it’s still a healthy (and historically normal) year-over-year increase.

The economists at realtor.com® have a somewhat different view. They don’t think the Phoenix real estate market will slow down that much in 2017. In fact, they recently predicted that it will be the #1 housing market in the country in 2017, in a ranking that looked at 100 metro areas nationwide. The company’s economists expect home prices in Phoenix to rise by 5.9% next year, with a 7.2% increase in home sales (year over year).

Here’s a snapshot of their top housing markets list for 2017:

Hottest housing markets 2017
Top 10 housing markets of 2017. Source: realtor.com.

So what’s behind the top-ranked forecast for the Phoenix real estate market in 2017? What market factors are driving these predictions? Inventory has a lot to do with it. Or rather, the lack of inventory.

There is currently a lot of demand for housing in Phoenix, Arizona, particularly among retiring baby boomers who often relocate to the area. But there’s not enough inventory to satisfy the current level of demand, and this is pushing home prices north.

Buying a Home Now Versus Later

While home prices might rise more slowly in 2017 than they did this year, they are still predicted to rise steadily throughout the year. And that’s the key takeaway here, from a home-buying perspective. Forget about all of the “hottest housing market” rankings for a moment. The bottom line is that Phoenix home buyers who postpone their purchases until later in 2017 will likely pay more for a house.

Granted, you should never buy a home until you’re financially and emotionally ready for it. At the same time, you have to keep an eye on market trends. And the market is clearly trending upward right now.

Mortgage Rates on the Rise

Mortgage rates shot up over the last few weeks, and they’re expected to continue rising gradually throughout 2017. This is another important housing forecast for Phoenix home buyers, because it impacts buying power. Here are the latest trends on the mortgage front.

If a picture is worth a thousand words, the following chart speaks volumes. This chart accompanied the latest release of Freddie Mac’s weekly survey of the mortgage market. The big spike on the far-right side represents the last few weeks. As you can see, mortgage rates have risen sharply recently.

Mortgage rate trends December
Mortgage rate trends through December 8, 2016. Source: Freddie Mac.

Looking forward, both Freddie Mac and the Mortgage Bankers Association have predicted that rates will rise gradually during 2017. Granted, we probably won’t see any more big spikes like this one. But mortgage rates could inch upward over the next 12 months. That’s the forecast being offered by industry watchers, and it’s another important point to consider when planning to buy a home.

Disclaimer: This story contains predictions and forecasts for the Phoenix, Arizona real estate market in 2017. Data and projections were compiled from third-party sources not associated with our company. We have presented them here as an educational service to our readers.