Early Retirement Extreme Forums

Anyone care to venture a guess as to how the housing market will be doing next year? I want to buy a house with cash soon (< 1 year), so naturally if we are at a turning point with record low mortgage rates ending, I would want to wait a little longer if there are good odds of falling prices.

Since average mortgage rates just jumped from roughly 3.5% to 4.0%, the amount of the mortgage would have to come down 6% to make the monthly payment the same. Maybe that will cancel the upward momentum of prices for the short term?

Where I am (Massachusetts), everyone still says houses are in short supply... though there are plenty of decent ones that have been listed for a while when I search. So I'm not sure how high mortgage rates will have to go to reverse the trend.

Can the year ahead in the housing market even be predicted with any degree of certainty? What should I keep an eye on besides of course home price indices and mortgage rates?

I don't live where you live, but we still share the main factor for house price development which is the interest rate and availability of credit. Those are huge drivers for demand. I predict no big change in those factors, but I expect interest rates to move slightly upwards in 2017. The market has been moving upwards too, and so I won't be surprised if it flattens out a bit. We have seen about 5% per year here in my area for the last 3 years, I predict 3-5% in 2017 which is slightly above inflation.

Another short term factor is the "current psychology" in the market. Do people buy (replace) their house before selling or after selling? The market is considered "hot" when people buy first and sell later, which explains why the market can shift dramatically when it shifts.

Activity in house building and increase/decrease of houses for sale are other important (local) factors in the short-medium term. Population growth/decline, wage growth and inflation rates are medium-long term factors.

Obviously the biggest factors are all local. The "market" can be local or national or worldwide.

For some systemic factors, a change in interest rates has always been big, along with the general availability of credit or capability to take on credit (too much student loans will have some effect?). Also, if Trump does away with the mortgage deduction, or if he otherwise tweaks some things related to home/land ownership taxes/credits, that would also cause some big effect. I suppose some trends like urban centers growing (with typical NIMBY humans blocking new construction if they care enough), autonomous cars, climate change, no more ed.gov, would also have a large effect on real estate.

I don't really care to make any worthwhile prediction (with my own money) except for an uptick in van dwelling (or other low cost dwelling units) if current trends continue.

Does your locale have inbound migration, neutral, or outbound migration? That is the first factor in determining where local real estate prices are headed, modified by interest rate & credit availability.