The Teles 2017 Real Estate Outlook: Can you Outthink the Market?

A few weeks ago, to kick off the new year, Teles Properties held it’s annual real estate outlook call for 2017.

The call was hosted by a number of Teles heavy hitters. Offering expert insights were Peter Loewy, Teles Properties chairman and CEO, Teles President Sharran Srivatsaa, President and Founder Peter Hernandez, and President of Riviera Financial, Bill Grasska.

The call covered six main topics as the team looked ahead to what 2017. Below are a few excerpts from the topics discussed on the call. Find the link to the full call below, or click here to download a .pdf of the report.

Housing Market Normalization

“It has been a long time since we can all remember a ‘normal’ market,” Srivatsaa told the call, “where buyers generally have access to an inventory of homes, sellers are used to a more predictable timeline to sell a home, interest rates are fairly predictable so you can lock in mortgage payments, and there is pricing and value stability in the market.””We predict a continued healthy trend of inventory balancing across markets, where demand and supply are starting to find common ground given the current market price points.” Srivatsaa noted that a more balanced market will mean smoother sailing for everyone with less overall volatility in emotions and pricing resulting in modest 4-6% increases.

Rising Interest Rate Landscape

The prediction is that 2017 will witness rate increases by the Fed and it will have a trickle down impact on consumer mortgage rates. The takeaway here? “We are marching into higher, but still historically low, rate territory and we advise consumers to act on any rate-based financial decisions sooner rather than later. With chatter of banking regulations possibly loosening, more creative mortgage products may also become available to consumers.”

Converging Millennial and Boomer demographics prime the engine

Now representing more than 1/3 of the workforce, we expect Millennials to dominate the first-time home buyer category and begin to represent the largest share of homebuyers (approximately 42%) beginning in 2017 and continuing to do so for many years to come.Still, however, Boomers make up 35% of the homeowner population. The uniting trait between these two very different groups? Their belief in the value of homeownership and its role in the pursuit of the so-called American Dream.

Lack of affordability drives new growth markets

At some point, these buyers who aren’t able to afford California are going to buy elsewhere and we project that this “pricing out” will spawn the establishment and rapid growth of new real estate markets in the years to come.The prediction here, which points to a trend that extends far beyond real estate alone, is that new markets will open up as employers are being extremely flexible with working remotely, which has begun the era of truly distributed human capital in organizations where people are choosing to live where they want to live as opposed to being forced to live near their workplace and commute in every day.

Rent vs. Buy: Overcoming Analysis Paralysis

Over the last 5 years, there has been a significant dislocation in Rents v. Home Values which priced out several buyers and forced them to rent. In  2017, we are moving into a market where rents are stabilizing, home values and pricing are both less volatile, and lending rates are poised to increase, but still historically low. We predict increase in organic buyer demand from renters who feel like this is an opportunity of a lifetime to grab the American Dream.

Wildcard – Trump

We have no idea what Trump is going to do. Period. However, we see that more as a positive than a negative for the real estate industry because whatever initiatives are being put in place the fundamentals of demand, supply, demographics, and rates are going drive the housing engine in the meantime. We recommend a deep focus on market fundamentals with an eye toward consumer confidence.

Trump has proposed growth oriented infrastructure spending and has also proposed loosening banking regulations, so we surmise at this time, that the Trump Presidency will not negatively affect the real estate industry.

There are more questions than answers here, and some of them are extremely pertinent: how will Trump’s $550 Billion transportation and infrastructure plan work and will it be a demand driver for housing? Is Trump serious about creating more regulatory ease for builders to bring more new inventory to the market? Is the Trump administration going to have a collaborative relationship with the Fed given his public dislike for Chair Janet Yellen? Where do Fannie and Freddie fall on his priority list?

To hear the call in it’s entirety, check out the Teles Soundcloud page, which features regular programming and hosted calls. Find the 2017 Outlook call here.

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