Zillow was out Tuesday with its look ahead to 2017, during which it says recent trends will reverse course as the housing market's economic recovery enters a new stage. Renting will become more affordable, more Americans will drive to work, and the home-ownership rate will bounce back from historical lows.
Moreover, Zillow thinks Millennials will play a significant role in increasing that home-ownership rate. Nearly half of all buyers in 2016 were first-time buyers, and millennials made up more than half of this group of buyers.
Among Zillow's other predictions:
- Cities will focus on denser development of smaller homes close to public transit and urban centers.
- More millennials will become home owners, driving up the home-ownership rate. Millennials are also more racially diverse, so more home owners will be people of color, reflecting the changing demographics of the United States.
- Rental affordability will improve as incomes rise and growth in rents slows.
- Buyers of new homes will have to spend more as builders cover the cost of rising construction wages, driven even higher in 2017 by continued labor shortages, which could be worsened by tougher immigration policies under President-elect Trump.
- The percentage of people who drive to work will rise for the first time in a decade as homeowners move further into the suburbs seeking affordable housing – putting them further from adequate public transit options.
- Home values will grow 3.6% in 2017, according to more than 100 economic and housing experts surveyed in the latest Zillow Home Price Expectations Survey. National home values have risen 4.8% so far in 2016.
"There are pros and cons to both existing homes and new construction, and the choice for home buyers can often be difficult. For those considering new construction in 2017, it's worth considering the added cost that may come amidst ongoing construction labor shortages that could get worse if President-elect Trump follows through on his hard-line stances on immigration and immigrant labor," said Dr. Svenja Gudell, Zillow's chief economist. "A shortage of construction workers as a result may force builders to pay higher wages, costs which are likely to get passed on to buyers in the form of higher new home prices."