Posted December 12 2016, 9:00 AM PST by Jill Jacobi Wood, OB Jacobi & Geoff Wood

Perspectives: 2017 Forecast

Posted in Perspectives by Jill Jacobi Wood, OB Jacobi & Geoff Wood

Well, it’s December; the time of year when we look to our crystal ball and offer our housing market predictions for the coming year. And by crystal ball we mean Windermere’s Chief Economist, Matthew Gardner, who has been travelling up and down the West Coast giving his annual forecast to a variety of real estate and financial organizations. Last month’s surprising election results have created some unknowns, but based on what we do know today, here are some thoughts on the current market and what you can expect to see in 2017.

HOUSING SUPPLY: In 2016 the laws of supply and demand were turned upside down in a majority of markets along the West Coast. Home sales and prices rose while listings remained anemic. In the coming year, there should be a modest increase in the number of homes for sale in most major West Coast markets, which should relieve some of the pressure.

FIRST-TIME BUYERS: We’re calling 2017 the year of the return of the first-time buyer. These buyers are crucial to achieving a more balanced housing market. While rising home prices and competition will act as a headwind to some first timers, the aforementioned modest uptick in housing inventory should help alleviate some of those challenges.

INTEREST RATES: Although interest rates remain remarkably low, they will likely rise as we move through 2017. Matthew Gardner tells us that he expects the 30-year fixed rate to increase to about 4.5 percent by year’s end. Yes, this is well above where interest rates are currently, but it’s still very low.

HOUSING AFFORDABILITY: This remains one of the biggest concerns for many West Coast cities. Some markets continue to see home prices escalating well above income growth. This is unsustainable over the long term, so we’re happy to report that the rate of home price appreciation will soften in some areas. This doesn’t mean prices will drop, but rather, the rate of growth will begin to slow.

Last but not least, we continue to hear concerns about an impending housing bubble. We sincerely believe these fears to be unfounded. While we expect price growth to slow in certain areas, anyone waiting for the floor to fall on housing prices is in for a long wait. Everything we’re seeing points towards a modest shift towards a more balanced market in the year ahead.


3 Comments

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  • Of course you think there's no housing bubble. You didn't think it was a bubble when it was. You're real estate agents; You don't care whether people can afford it or not, you support banks making people house poor. Because the more it costs, the more you profit.

    Posted December 27 2016, 7:57 PM by Brian

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    • It is a fact that a buyer today must make a substantial down payment in addition to being qualified for a mortgage loan, whereas a decade ago a buyer could actually finance their down payment with a second mortgage. The lending market today is far better regulated than it was back then, and the result is more responsible lending practices and stability in the market. -David

      Posted January 04 2017, 8:46 PM by David

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    • Brian – Thank you for your comment. I am not exactly sure what your point is; however, I am happy to offer you some additional perspective.

      Firstly, nobody “makes” anyone buy a home and there are now, thankfully, substantial checks and balances that need to be addressed to prove that a household can afford to buy. Brokers aren’t to blame.

      Additionally, and as my piece suggests, my Firm remains acutely aware of issues surrounding housing affordability and it concerns us greatly. (On a separate note, I would add that I am heavily involved, at the State level, in trying to address the major issue of housing affordability which I consider to be of paramount importance to our State.)

      Finally, if you are aware of any quantifiable analysis/data to prove that the Puget Sound market is in a “bubble” please reach out to me with the details as I would be very happy to review any studies that could act as a counterpoint to my own.

      Posted December 28 2016, 9:18 AM by Matthew Gardner - Chief Economist, Windermere Real Estate

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