Renting vs. Buying a Home in 2017: Ten Cities Were It’s a No-Brainer

Earlier this month, the real estate information company Trulia published the results of a rent-versus-buy analysis for major cities across the country. In most of the country’s major metro areas, buying is still cheaper than renting in terms of monthly costs.

In some cities like Philadelphia, Fort Lauderdale and New Orleans, there’s a big advantage to buying a house versus renting in 2017. Home buyers who purchase a median-priced property in these areas could enjoy much lower housing costs than those who pay rent.

Renting Versus Buying a Home in 2017

To determine the financial costs associated with renting versus buying in 2017, Trulia’s analysts assumed that people stay in their homes for seven years and can afford to put 20% down on a 30-year fixed-rate mortgage loan.

(Editor’s note: The seven-year staying time used for this study is fairly realistic, based on moving and relocation trends. But the down payment might be a big high. Many home buyers these days make smaller down payments.)

Using the parameters stated above, the company found that it is still cheaper to buy a home than to rent in all of the country’s 100 largest metropolitan areas. But the monthly cost gap between renting and buying has narrowed in recent months, mainly because home-price gains have outpaced rent increases in most cities.

In some areas, having a higher mortgage rate or putting less money down would shift the entire comparison, making it too close to call. But in other cities, the rent-versus-buy decision is more clear-cut.

Here are some key findings:

  • Steadily increasing home values, combined with “flat” or slower-rising rent costs, are shifting the rent-versus-buy equation in many of the largest housing markets across the country.
  • It’s still a better deal to buy a home than to rent, in most cities across the U.S. But changing economic conditions are making it a close call in some areas.
  • Within the 100 metro areas reviewed by Trulia in spring 2017, buying a home was still cheaper than renting. But it’s a broad spectrum. For example, it’s about 50% cheaper to buy than to rent in Baton Rouge. But in San Jose, California, it’s only 3.5% cheaper to buy (based on median home prices versus rents).
  • While buying is still a better deal in most metro areas, rising mortgage rates have reduced the financial advantages of purchasing a home versus renting. Slower rent growth has also contributed to this trend. Home values increased in all 100 of the metro areas that were reviewed, while rent prices had either slowed or remain stable in 93 of the metros.
  • If mortgage rates continue to climb, renting could soon be the cheaper option in high-priced housing markets like San Francisco and Honolulu.

10 Cities Where It’s a Lot Cheaper to Buy

A couple of Louisiana metro areas topped the list of places where buying is cheaper than renting in 2017. South Carolina was also well represented in these rankings. According to Zillow, “Detroit and Philadelphia are also markets where buying far outweighs renting. Here, home seekers find it at least 45% cheaper to buy than rent.”

Here are the top ten cities where it’s much cheaper to buy a home in 2017:

U.S. Metro Median Price Median Rent % Cheaper to Buy Than Rent, Spring 2017
Baton Rouge, LA $171,238 $1,400 -50.1%
Philadelphia, PA $148,712 $1,275 -48.3%
New Orleans, LA $176,360 $1,400 -47.9%
Columbia, SC $129,134 $1,150 -47.8%
Fort Lauderdale, FL $226,528 $1,800 -47.0%
Charleston, SC $226,158 $1,600 -47.0%
Greenville, SC $153,993 $1,250 -46.3%
Detroit, MI $70,031 $850 -46.2%
Birmingham, AL $130,430 $1,100 -45.8%
West Palm Beach, FL $253,719 $1,950 -45.7%

In some of the higher-priced areas of the West Coast, including San Jose and San Francisco, a slight increase in mortgage rates could make renting the cheaper option. In fact, seven of the 10 cities with the closest margins were located in California. Residents of these more expensive housing markets have a tougher decision, when choosing between renting or buying a home in 2017.

Incidentally, California’s housing markets are also tough for first-time buyers.

Disclaimer: This article uses data provided by third parties not associated with our company. The results and findings shown above are deemed reliable but not guaranteed. We have presented them here as an educational service to our readers.

These California Markets Are Tough for First-Time Buyers in 2017

California has some of the worst housing markets for first-time home buyers, according to a recent report. Orlando and Tampa, on the other hand, are two of the best markets for those buying their first home.

First-time buyers in Florida are enjoying favorable market conditions right now, with relative affordability and low competition. But in California, not so much.

A recent analysis by the real estate data company Zillow found that California is home to some of the worst housing markets for first-time home buyers. San Diego, Los Angeles, San Jose and San Francisco were all at the bottom of the list.

Related: 10 markets with inventory shortages

Best and Worst Housing Markets for First-Time Buyers

On May 12, 2017, Zillow published a report that listed some of the best (and worst) real estate markets for first-time buyers. The “best” locations where defined as those with an abundance of affordable homes to choose from, and a lower level of competition.

The company also considered the so-called “break-even horizon,” which is the number of years a person would need to live in a home before buying made more financial sense than renting it.

Here are some highlights from their report:

  • The Southeast and Midwest offer some of the best housing markets for first-time home buyers, as of spring 2017.
  • Two Florida cities, Orland and Tampa, topped the rankings as best cities for those purchasing their first house. These cities have comparatively low home prices, plenty of inventory, and a relatively short break-even horizon.
  • The four worst housing markets for first-time home buyers were all located in California. These cities have much higher prices (on average), severe inventory shortages in some cases, and fierce competition.
  • California’s San Francisco Bay Area is one of the toughest areas for first-timers. In terms of dollar amount, a 5% down payment in the Bay Area is larger than a 20% down payment in most of the best markets for first-time home buyers.

California Markets Are Tough to Break Into

At the bottom of Zillow’s list of tough markets for first-time buyers, we find the following California metro areas:

San Diego — According to the report, San Diego had a median home price of $532,000. That was the lowest of the four “worst” housing markets for first-time buyers. But the break-even horizon in San Diego was 4 years, 6 months. Theoretically, that’s how long a buyer would need to stay in a home before it made more sense financially than renting. The economists at Zillow expect home prices in the area to rise by 0.9% between now and spring 2018.

Los Angeles — The median home value in Los Angeles was $601,900, as of May 2017. The break-even point (where buying becomes a better value than renting) was similar to San Diego’s. The company’s one-year forecast for Los Angeles home prices called for a modest gain of 0.8% over the next 12 months.

San Jose — With a median price of $986,000, San Jose is one of the most expensive real estate markets in California, and one of the toughest for first-time home buyers to break into. The break-even horizon there is longer than five years. Tight inventory and high demand make San Jose a highly competitive housing market for first-time buyers in 2017.

San Francisco — This metro area’s median home price was $843,200, according to Zillow. Within the city itself, the median value has risen above $1 million. The company’s analysts expect home prices in the area to remain more or less flat over the next year, so buyers probably shouldn’t expect much equity growth. The San Francisco real estate market has some serious affordability issues in 2017, so home prices there are basically bumping into a ceiling right now.

Now Florida, on the Other Hand…

At the other end of the spectrum, we find housing markets with less competition and lower prices. These metro areas are much more accessible for those buying a first house.

The best real estate markets for first-time buyers in 2017 include the following:

  1. Orlando, Fla.
  2. Tampa, Fla.
  3. Indianapolis, Ind.
  4. Las Vegas, Nev.
  5. San Antonio, Texas
  6. Pittsburgh, Pa.
  7. Atlanta, Ga.
  8. Detroit, Mich.
  9. Dallas, Texas
  10. Cleveland, Ohio

The real estate markets shown above are generally less competitive, with plenty of affordable properties for sale. Additionally, the company’s forecasts suggest that first-time home buyers in these cities will see strong price growth over the next year, allowing them to accumulate equity.

5 Housing Markets Where Home Prices Could Outpace the Nation in 2018

Recent housing market forecasts suggest that home prices nationwide will continue rising over the next 12 months, at least in most parts of the country. But the gains will probably be smaller than those recorded over the last 12 months. As for high performers, the five cities below could outpace the nation in terms of year-over-year price growth through 2018.

5 Housing Markets With Above-Average Forecasts: 2017 – 2018

According to the real estate analysts and economists at Zillow, home prices in the U.S. are expected to rise by around 2.6% over the next 12 months, extending into April 2018.

But some cities could see larger gains as a result of strong demand and a limited supply of homes. Here are five housing markets that are forecast to outpace the nation over the next year, where house values are concerned.

Bridgeport, Connecticut: 5.2%

Starting in the Northeast, we have the real estate market of Bridgeport, Connecticut. Bridgeport is expected to see above-average price increases into the first part of 2018.

The median home value in this relatively affordable housing market was $165,200, as of April 2017, after a gain of around 10% over the last year. Zillow’s economists expect prices to rise by more than 5% over the next 12 months, nearly double the national outlook for the same period.

Dallas, Texas: 5.8%

According to a recent article on DallasNews.com: “All but five of the 45 Dallas-area residential districts that The Dallas Morning News tracks each quarter had home sales price hikes [over the last year], according to data from the Real Estate Center at Texas A&M University and North Texas Real Estate Information Systems.”

When looking at the first quarter of 2017 compared to the same period last year, the biggest home-price gains occurred in DeSoto (25%), Lancaster (22%), southern Dallas (22%) and the Park Cities (22%).

Across the city as a whole, Zillow reported a 15.4% increase in median home prices over the last year, and predicts the housing market will appreciate by nearly 6% over the next year.

Sacramento, California: 5.4%

Earlier this year, Zillow published a list of what it felt would be the ten hottest housing markets of 2017, in terms of price growth. Sacramento, California was ranked #10 on their list, out of the 100 largest metro areas in the country.

According to the company’s research team, home prices within the Sacramento housing market rose by 11.3% over the last year, and are expected t0 climb by another 5.4% over the next 12 months.

Seattle, Washington: 5.1%

The Seattle housing market has generated a slew of headlines over the last couple of years, mainly due to the high level of competition among home buyers. (It was also ranked in the #2 spot, on the list of “hottest markets” mentioned above.) Housing inventory is tight in Seattle, while demand continues to grow from population growth.

According to Zillow, home prices in the city rose by 12.2% over the last 12 months. Looking forward, the company has forecast a gain of 5.1% between now and April 2018.

Tampa, Florida: 4.5%

Home prices in the hot Tampa, Florida housing market rose by a whopping 15% over the last 12 months, according to the team at Zillow. To put that in perspective, historically “normal” appreciation is somewhere around 3% annually. So the Tampa housing market has experienced some seriously above-average price gains in recent months.

Going forward, Zillow expects home value appreciation to slow considerably. They’ve predicted that the median price for houses in Tampa will rise by 4.5% from April 2017 to April 2018. While that does signal a cooling trend, it’s still higher than the company’s national outlook (for a 2.6% price gain over the next 12 months). So the Tampa real estate market deserves a spot on our list of high performers.

Disclaimer: This story contains housing market forecasts and home-price projections that were provided by third parties not associated with our company. The Home Buying Institute makes no claims, assertions or guarantees about future real estate tends.

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.

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/

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.

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.

Los Angeles Housing Market Forecast 2017: Home Prices Leveling

Home prices in Los Angeles, California have risen steadily — and significantly — over the last couple of years. But that might begin to change in the months ahead. Recent forecasts for the Los Angeles housing market suggest that prices could rise more slowly in 2017, compared to this year and last.

Los Angeles Housing Market Forecast for 2017

There has been a lot of talk lately that housing markets across California are reaching peak levels, in terms of affordability. As a result, market forecasts for 2017 are more conservative than in the past.

This is true for the Los Angeles real estate market as well. Recent predictions and forecasts from housing analysts suggest that L.A. home prices will slow down in 2017.

Take Zillow for example. The economists at the real estate information company recently predicted that Los Angeles home values will rise by a mere 1.7% over the next 12 months (through November 2017). That’s a much slower rate of appreciation than what we’ve seen during 2015 and 2016.

According to Zillow: “The median home value in Los Angeles is $590,400 … home values have gone up 7.3% over the past year and Zillow predicts they will rise 1.7% within the next year.”

This reflects the housing market forecasts being issued for many California cities. Across the Golden State, real estate markets are expected to cool down to some degree in 2017. Pick a city, any city, and chances are the 2017 home-price forecast is a fraction of the previous year’s gains.

Will Slowing Home Prices Silence the “Bubble” Talk?

The 2017 forecast for the Los Angeles housing market suggests that home values will rise more slowly over the next year. But that’s not necessarily a bad thing. In fact, it would ease concerns of a real estate price bubble.

At the end of 2015, Zillow surveyed dozens of economists and housing analysts about home price trends in the United States. According to the report accompanying that survey: “Ten or more experts think there’s a risk that Boston, Los Angeles or Miami will enter a [price] bubble in the next three years.”

That was in December 2015, and home prices in Los Angeles have risen steadily since then. A continuation of those rapid gains could, in fact, lead to a bubble scenario. But it doesn’t appear likely at this point. If recent predictions for the the Los Angeles real estate market prove true, and prices do in fact slow down considerably, then it would give the market a chance to “normalize” and wages a chance to catch up.

Mortgage Rates on the Rise

At the end of last year, mortgage industry analysts predicted that mortgage rates would rise steadily during 2016. They were wrong for the most part — until now. Thus far in November 2016, mortgage rates have been on a steady rise. Last week, the average rate for a 30-year fixed home loan shot up by nearly 40 basis points (0.40%). See chart below.

Freddie Mac rate chart, Nov
Mortgage rate trends to date. Source: Freddie Mac.

We expect the threat of rising rates to spur the Los Angeles housing market in 2017, particularly among home buyers. We will likely see a slowdown during the end-of-year holiday seasons, like always. But when the new calendars go onto the walls, a lot of L.A. home buyers will scramble to make their purchases before rates climb higher. We’ve been lulled by low mortgage rates for a long time. The latest spike, shown in the chart above, will serve as a wake-up call — and a call to action.

Disclaimer: This story contains predictions and forecasts for the Los Angeles real estate market in 2017. Such statements were compiled from third-party sources not associated with our company. We have presented them here as a service to our readers. The Home Buying Institute makes no claims or assertions about future housing market conditions in Los Angeles or elsewhere.