What Trends Will Impact Homeownership in 2017?

According to the recent Fannie Mae Economic Developments report, issues with housing inventory continue to plague the market due to an increase in household formation that housing supply cannot keep up with. The report says that these factors will be the biggest issues facing renters looking to move into homeownership.

“The number of existing homes for sale declined 6.8 percent in the third quarter from a year ago, marking the sixth consecutive quarter of year-over-year decreases and the largest drop since the second quarter of 2013,” says Fannie Mae. “CoreLogic data by price tier continued to show tighter supply and more rapid price gains in the lower tiers of the home sales market.”

Despite these challenges Fannie Mae says, “encouragingly, the homeownership rate has recently shown signs of stabilization.”

“The rate rose 0.6 percentage points in the third quarter, offsetting the drop in the prior quarter, and stood two-tenths below the rate in the third quarter of 2015,” adds the GSE.

E. Thomas Booker, III, Managing Director at the Collingwood Group, shares similar sentiments for the increase in homeownership and the direction the rate is headed in the next few months.

“The homeownership rate can also be thought of as a measure of the confidence in the economy,” says Booker. “I believe homeownership rates will increase in 2017.  Continued job growth, sustained income gains, and the expectation of increased economic activity will tempt many who have a bias for owning, but have endured years of steadily increasing rental rates, to a decision point.”

Booker adds, “If growth rates are closer to 2 percent or greater, the homeownership rate will be a primary beneficiary. As long as rates rise moderately and the political environment does not become a major economic consideration (taxes, radical changes to healthcare, entitlements etc.), 2017 should be bullish for housing and homeownership.”

In likeness to Booker's predictions, Fannie Mae’s report states that they anticipate improvement in housing activity particularly with housing starts and home sales in 2017.

To read the full Fannie Mae November 2016 Economic Developments report, click HERE.