This is my version of 2017 Real Estate Predictions. No I didn’t dust off my Crystal Ball. I left that back in my desk at an undisclosed address in a Wall Street building that has long since been converted to condominiums. Instead, a little deductive reasoning leads me to believe that the following trends will come to pass in 2017.
Higher interest rates – if they do materialize- will obviously mean more expensive mortgage cost. This will not have that much of an impact on very qualified buyers, not in the near future. Less qualified buyers are a different story and this is where lenders make a lot of money – fleecing the poor. What else is new? So with interest rates going up and real estate values presumably going up, too, how long until we see the kind of lending abuses that caused the collapse in the first place? My guess not long at all.
Low inventory will continue, unless…
Inventories are really tight, no news there, as would-be sellers are sitting back and enjoying price appreciation. As long as that continues, nothing will change. However unless wages suddenly go up to match the increasing cost of housing all this will come to a halt and prices will come down and fast. When that happens additional supply will hit the market and maybe have the same effect as the dreaded “delta hedging” did back in the day. ( Look it up.)
Bubble Bubble Toil and Trouble
Again nothing clairvoyant here, but as prices go higher and as the very high-end is weakening, we’ll hear more and more talk of a bursting bubble. Here’s the thing – by the time we know we are in a bubble, the darn thing deflates in spectacular fashion and we’ll all be wondering what happened. What to do? Well, be prudent and don’t get over-leveraged is all I can come up with.
Bidding Wars Continue
Low inventory and increasing prices are the recipe for continued bidding wars and that’s just what we’ll have. An unexpectedly steep jump in interest rates can put an end to this and so can the evil appraisers! If the houses don’t appraise, buyers will have to dish out higher down payments and that in turn will put the brakes on the market. I see no indication that the latter is happening and as for the former, let’s hope Janet Yellen doesn’t lose her marbles.
No More Sub-$200K Homes
The high end of the housing market has swapped with the low end and now the latter is on fire as the former is slowing down. The $200,000’ish market for homes is almost gone in Hudson county. Even homes that are in need of significant cosmetic renovations are pushing to the $300K mark.
Today, buyers demand a higher degree of “smartness” in new construction buildings and houses especially at the higher entry point. However, main stream products like Amazon Echo and Google Home offer a surprising level of automation at affordable prices. The Christmas season sales for these products were record setting, so it stands to reason that more and more of us will have a new best friend named Alexa.