2017 Housing Market Predictions Come True

Below are 8 Housing Market Predictions we shared in January of 2017 and in reflecting back on these predictions, they were wildly accurate!  The predicted 8.5% average home price increase for the year was spot on with the final numbers for the Portland Metro area coming in right at 8.2% (see previous blog post - Market Action Report for details).  Here were those 2017 predictions:

2017 Housing Market Predictions

1.  Jobs. The local housing market has benefited greatly from healthy job growth, and this is likely to continue, albeit at a slightly more tepid rate, through 2017.

2.  In the coming year, expect to see rental rate growth start to slow and concessions return as developers vie for prospective tenants. Demand may exceed supply in 2017 but the market will remain fairly tight.

3.  The millennials are here — and they are ready to buy. The only problem will be whether they will be able to find – or afford – anything to buy.

4.  Home prices will continue to rise. But expect to see price growth starting to taper. The market has been on a tear since the technical bottom out in 2011, with average home prices up by an impressive 64 percent from the low, and 16 percent above the pre-recession peak seen in 2008. Given that interest rates are now likely to rise at a faster rate than previously forecasted, I believe there will be some slowing in price appreciation, but values will still increase at rates that are well above the national average. Look for home prices to increase by an average of 8.5 percent in 2017.

5.  More homes for sale? We are optimistic that inventory levels around Portland will increase, but it still won’t be enough to meet continued high demand.

6.  Affordability. This is my biggest concern for the Portland housing market. Housing prices – specifically in areas with ready access to our job centers – are pulling way ahead of incomes, placing them out of the reach of much of our population. This forces many buyers to move farther away from our job centers.

7.  New home starts/sales. As much as I would love to say that we can expect a substantial increase in new homes in 2017, I am afraid this is not the case. Historically high land prices, in concert with ever-increasing construction and labor costs, slow housing development, as the price of the end product is increasingly expensive.

8.  Are we setting ourselves up for another housing crash? The simple answer to this question is no. While home price appreciation remains above the long-term average, and will continue to be so, at least through 2017, credit requirements, down payments and a growing economy will all act as protectors of housing values.