For metro Atlanta’s housing market, 2017 will be a year of growing modestly, according to a forecast released today by a California-based data firm.
Atlanta prices on average will rise 5.93 percent while sales will increase just 2.67 percent, making it the 60th hottest market out of the largest 100 metro areas, according to Realtor.com.
The forecast for decelerating growth is less upbeat than before the election because Donald Trump’s victory seemed to trigger a rise in interest rates that will make mortgages more expensive. And that will chill the ability of some buyers – especially first-time entrants into the market – to close the deal, said Jonathan Smoke, the company’s chief economist.
Higher mortgage rates will clash with rising demand from millennial buyers – cutting the number of people who will be purchasers, he said.
“We don’t expect the outcome of the election to have a direct impact on the health of the housing market or economy as we close out 2016, said Smoke. However, “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.”
Interest rates will likely hit 4.5 percent, while national home prices rise just 3.9 percent, he said.
The homeownership rate – which crested at nearly 70 percent at the peak of the housing boom – will flatten out at 63.5 percent, Smoke predicted. The rate had dropped to 62.9 percent this year. The difference between top and bottom represents millions of households that would have been homeowners at the higher rate.
Among the factors Smoke highlighted for the coming year:
— Millennials and boomers will dominate the market. Higher interest rates mean a lower-than-expected share of millennial buyers, just 33 percent of the purchasers. In contrast, baby boomers, who are less dependent on financing, will account for about 30 percent.
— Midwestern cities will be hotbeds for millennials, Smoke said. Top destinations will include Madison, Wis., Columbus, Ohio, Omaha, Neb. and Des Moines, Iowa.
Housing tends to be more affordable in those cities.
— Price appreciation will slow. Nationally, prices were up about 4.9 percent this year.
— Fewer homes will be on the market — an imbalance that has particularly plagued much of the metro Atlanta market.
— The fastest rise in prices and sales will be in western cities, especially in California, Colorado, Arizona and Utah.