As the housing market’s economic recovery enters a new stage in 2017, the homeownership rate will bounce back from historical lows and renting will become more affordable, according to a report released Tuesday by Zillow.
Millennials will play a significant role in increasing the homeownership rate, but President-elect Donald Trump’s policies could make their purchase more expensive.
“There are pros and cons to both existing homes and new construction, and the choice for home buyers can often be difficult,” Zillow’s chief economist Svenja Gudell said in a statement.
Here’s what Zillow sees ahead for the housing market in 2017:
1. City planners will focus on denser development, with smaller homes close to public transportation and urban centers.
2. More millennials will buy homes, driving up the homeownership rate. In 2016, about half of all buyers entered the market for the first time, and millennials comprised more than half of this group.
And because millennials are also more racially diverse than other age segments, more homeowners will be people of color, reflecting the U.S.’s changing demographics.
3. New home buyers will have to spend more as builders cover the cost of rising construction wages. These will rise even more in 2017 because of continued labor shortages, and “could get worse if President-elect Trump follows through on his hard-line stances on immigration and immigrant labor,” Gudell said.
“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.”
4. Rents in 2017 will be more affordable than they have been for the past two years as incomes rise and growth in rents slows. Zillow reported in September that rents in the country’s 35 largest metro areas were appreciating at a 1.7% rate, compared with rent appreciation of more than 6% a year earlier.
5. The percentage of people who drive to work will rise for the first time in a decade as homeowners move deeper into the suburbs in search of affordable housing—and farther away from adequate public transit options.
6. Home values will grow by 3.6% in 2017, according to more than 100 economic and housing experts recently surveyed by Zillow. National home values have risen by 4.8% so far in 2016.
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