Housing trends to watch in 2017

Pam Griffin The Destin Log

Recent spikes in mortgage rates may potentially price some first-time home buyers out of the market. The higher rates mixed with rising home prices will likely cause the housing market to slow in 2017 and see only moderate growth, according to a new report released by® that outlines forecasts for the housing market in the new year.

“The 2017 national real estate market is predicted to slow compared to the last two years across the majority of economic indicators,” according to the report.

Home prices are expected to rise 3.9 percent, and existing-home sales are predicted to increase 1.9 percent to 5.46 million homes in 2017.

Mortgage rates are forecasted to reach 4.5 percent, rising above the 3.5 percent averages seen for most of 2016. These higher rates may reverse the recent increases in first-time home buyers coming to the market.

“The 40 basis points increase in rates in the days following the election has caused us to increase our interest rate prediction for next year,” said Jonathan Smoke,’s chief economist. “With more than 95 percent of first-time home buyers dependent on financing their home purchase, and a majority of first-time buyers reporting one or more financial challenges, the uptick we’ve already seen may price some first-timers out of the market.” also predicts the following housing trends could reshape the housing market in 2017:

1. Millennials and boomers to dominate: These two giant demographics are expected to fuel demand for at least the next decade in the housing market. has lowered its prediction of the millennial market share to 33 percent of buyers due to recent increases in mortgage rates. Baby boomers are expected to make up 30 percent of buyers in 2017.

2. Midwestern cities get more attention from millennials: Watch the country's midsection for a spike in the millennial purchase market share in 2017. Strong affordability in 15 of the 19 largest Midwestern markets will make them a millennial magnet in the coming months and years ahead. says that the following metros have an average millennial market share of 42 percent or higher: Madison, Wisconsin; Columbus, Ohio; Omaha, Nebraska; Des Moines, Iowa; and Minneapolis, Minnesota.

3. Price appreciation to slow: Home prices are forecasted to slow to a 3.9 percent year-over-year growth in 2017. That is down from an estimated 4.9 percent growth this year.’s analysis shows that of the 100 largest metros nationwide, 26 markets are expected to see prices rise 1 percent point or more. Greensboro-High Point, North Carolina; Akron, Ohio; and Baltimore-Columbia-Towson, Maryland, are expected to see the largest gains.

4. Fewer homes on the market: Inventory is expected to drop even lower in 2017, offering home buyers even fewer choices. Already, inventory is down an average of 11 percent in the top 100 metros.

5. Western cities to lead in prices and sales: Western metros are expected to see price increases of 5.8 percent in 2017. Sales are expected to rise 4.7 percent, which is higher than the anticipated averages for the rest of the country. Western markets continue to dominate's 2017 top housing markets list, notably Los Angeles, Sacramento and Riverside, California; Tucson, Arizona; and Portland, Oregon.

This article was contributed to The Log by National Association of Realtors.