Home prices are expected to have increased by about 5% in 2016. According to the latest Case-Shiller report, the index reached a new high in September, surpassing the previous record set in June of 2006.

For prospective home buyers, higher prices combined with rising interest rates make buying a home a bit more problematic. That doesn’t mean that home sales will fall off a cliff, but rather that they will moderate.

According to Jonathan Smoke, chief economist for Realtor.com, there are still reasons to be optimistic about 2017 home sales:

I would characterize our 2017 forecast as a moderation, as opposed to a slowdown. The pace of growth is still strong and, for pricing, still represents an above-average level of appreciation.

Smoke sees five trends driving the housing market in 2017:

1. Millennials and boomers will move markets as the younger generation get into the market and boomers look to downsize and sell.
2. Millennials will be attracted to the Midwest housing markets, particularly Madison, Wisconsin; Columbus, Ohio; Omaha, Nebraska; Des Moines, Iowa; and Minneapolis, Minnesota where homes are more affordable.
3. Price appreciation will slow to an estimated 3.9% in 2017, but a lack of inventory will keep prices rising at an above-average pace.
4. Housing inventory remains a challenge and that is not expected to change in 2017.
5. Metro markets in the West are expected to see price increases of 5.8% and sales increases of 4.7%, much higher than in the rest of the country.

In an earlier report, Realtor.com forecast mortgage rates to reach 4.5% in 2017 and sales of existing homes to increase by 1.9%. New home sales are forecast to increase by 10%, while construction of new homes is expected to rise by just 3%.

Get Our Free Investment Newsletter

I have read, and agree to the Terms of Use

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.