Special Report survey respondents and some of the industry’s top executives were nearly unanimous in believing 2017 will be another strong year for real estate.
The first quarter especially is expected to start with a hiss and a roar as buyers and sellers hasten to make a move now that the election is over and interest rates have undergone the first in a series of rises.
Overall, 2017 will be an unorthodox, non-traditional and unpredictable year, both nationally and globally. Those who are nimble will manage it best.
“What most people think they know about real estate will have to be re-educated. Low interest rates will no longer be the driving reason for home purchase, building personal wealth and stability will,” said one respondent.
A bird’s-eye view
Those surveyed for the 2017 Outlook Special Report expressed the hope that higher interest rates might free up inventory as more buyers and sellers, previously holding back, are galvanized into taking action due to the new market conditions.
Thanks to the momentum driving the housing market — good employment, rising salaries, high-earning millennials with an interest in homeownership who are unhappy with high rents — our research found there is good optimism about the housing market in 2017, with 27.43 percent of respondents saying they are extremely optimistic and a further 45.13 percent describing themselves as somewhat positive, while 11.95 percent are ambivalent.
Meanwhile, more than half of this survey’s respondents (52.21 percent) expect President-elect Donald Trump to have a positive effect on the U.S. housing market. They are looking to Trump to ease regulations and to look after an industry he knows well.
Said one upbeat respondent: “Trump will be running the country like a businessman versus a politician — he will be lifting some of the regulation that stifles the industry.”
A common sentiment expressed by respondents was that because Trump has an understanding of real estate, he will be reluctant to harm the industry.
“I am going to remain optimistic. Trump likes real estate so I hope he makes the conditions conducive for our industry to succeed,” said one respondent.
Added another glass-half-full respondent: “Trump understands the vital role that real estate plays in the health of the economy. I believe his administration will work not to negatively impact our business.”
Business has picked up for a number of respondents, including this Virginia respondent, since the election. “Millennials are starting to buy, interest rates are going up, which will get fence sitters off the fence. My showings and sales have picked up noticeably since the election.”
Explained this St. Louis, Missouri, agent: “I am optimistic because of my business. I have more buyers and sellers at this time than at any other time in the last 10 years. This gives me hope.”
All the signs are good, added another respondent: “I believe the economic outlook will be very positive, consumer confidence will be up, regulations in real estate will be softened and possibly Dodd-Frank repealed or modified. All that can have nothing but positive effects on real estate.”
Agents making expansion plans
Our survey found that almost 70 percent of those surveyed are optimistic or somewhat optimistic about the economy.
As a result, a strong majority (71.24 percent) of respondents have plans to expand their businesses next year.
More than half said they were optimistic about their own business, with more than 55 percent extremely happy with the way their business is heading into 2017 and a further 30-plus percent somewhat happy about the outlook.
And while respondents felt that Trump, with his real estate development background, would be good for the housing market, they were less sure about what a Trump presidency might do for foreign investment in the U.S.
Our research found that 23.01 percent thought he would be positive, 22.57 percent thought he would be negative and a further 40.27 percent were just not sure.
“It depends on what he does. If he clamps down on the international investment portion of real estate, mainly Asia, it will impact the markets with a large influx of Asian investors. They will pull their money out of the U.S. and take it to countries that are more welcoming,” said one respondent.
The seeming isolationist stance taken by the incoming President is not going to do the American market any good, added one San Diego respondent.
“We live in a global society. Although some prefer to believe that we’re isolated, we are very much a part of the world economy and need to act accordingly.”
Top industry figures agree: Optimistic outlook for 2017
As well as polling our readers, we also went to the heads of some of the country’s top real estate companies for their expectations on 2017 to see how they tallied with other respondents.
Their overview endorsed optimistic sentiments coming through in the Special Report, despite the level of uncertainty provided by what Pacific Union International CEO Mark McLaughlin called a “surprise election.”
Still, a decision either way was good news for real estate, putting people in a position to make housing decisions again, industry heads concluded.
Howard Hanna president Hoby Hanna said there had been an uptick already in activity since the election, which he sees continuing.
“Whether it’s the result of a Trump presidency or just the end to the divisive election, we’ve seen an increase in consumer confidence and buyer activity on the high end, which had come to a standstill through the summer and early fall,” he said.
“And with a double-digit increase in new sales activity for November and so far in December, we believe this consumer confidence will carry through the first quarter of next year and create a great start to 2017,” he added.
Another positive effect of a Trump presidency might be boons for construction, said Windermere Real Estate president O.B. Jacobi.
“The Trump presidency may also remove some obstacles for builders in the form of tax breaks and state incentives that limit regulations and encourage additional lending. Since an estimated 25 percent of the cost to build a home is considered ‘regulation,’ these changes would presumably help builders and consumers,” he said.
One possible downside to the big infrastructure projects that President-elect Trump has talked about in his campaigning is that it could cause a labor shortage for construction companies, said one survey respondent.
“If the government starts capital projects as per plan, there will be a significant labor shortage. This will put new home builders at a great disadvantage, resulting in higher home prices.”
Sales up in 2017
Our respondents and the chief economists of two large brokerages were united in the belief that unit sales and prices would go up in 2017.
Nearly 50 percent of respondents to our survey felt that unit sales would go up, while, 37.17 percent didn’t think the number would change and 16.37 percent said they would go down.
Almost 75 percent of those surveyed thought that prices will go up next year.
Windermere’s chief economist, Matthew Gardner, believes existing home sales should rise to 5.548 million units in 2017. He is also forecasting that existing home prices in 2017 will rise by 4.5 percent to a median of $242,700.
Pacific Union’s chief economist, Selma Hepp, also believes house prices will continue to rise, especially in markets that are already supply-constrained.
“Supply is still the largest contributor to continued elevated price appreciation since inventory of homes for sale remains at historical lows,” she said.
One Santa Clara county respondent is living this right now: “Inventory is still really tight here in Santa Clara County. That, coupled with job growth, it is looking like 2017 will mirror 2016’s market conditions.”
Hepp added there was the possibility of a very hot market in the next few years if certain elements fall into place.
“If the stronger growth expectations from lower taxes and more spending do realize, and there is deregulation in housing finance along with some Dodd-Frank repeal, we may be looking at a very heated market in the next few years.”
She said she would watch to ensure mistakes from the last housing crisis are not repeated, especially when it comes to alternative mortgage products and mortgage-backed securities.
Agents should be more productive in 2017
We asked respondents how they saw agent productivity progressing in 2017, and almost two thirds (63.72 percent) said agents would be more productive in 2017.
It will be a year when successful agents will have to work for their business, said one L.A. respondent.
But be warned: “The low-hanging fruit will be gone, and there are too many agents in our market who do not know how to consistently find and build business.”
ERA president and CEO Sue Yannaccone added: “I expect to see agent productivity increase for those who have a business plan and execute upon it. A renewed focus on listings and conversion and adopting technology will also be critical to increased productivity.”
McLaughlin said he was expecting to see a rise in productivity of his agents in 2017, but that the industry as a whole would be seeing decreasing productivity.
Technology predictions for 2017
Technology will be an important tool for improving agent productivity in 2017, said the industry heads.
“Technology and big data will continue to have a major impact on agent productivity in 2017,” said Coldwell Banker CEO, Charlie Young.
“Our most innovative sales associates are experimenting with virtual reality in their open houses, meaning soon they can show multiple listings to multiple people from one location,” he added.
More tech innovation is expected in 2017. On Keller Williams’ Chris Heller’s wish list is continued innovation in artificial intelligence (AI) and virtual reality.
This Atlanta respondent believes pressure from millennial buyers will drive the continued momentum of tech in real estate: “We are on the cusp of some insanely interesting virtual reality aspects. VR and live touring from home will be the next thing to disrupt the industry. As the average age of agents reduces from the boomers retiring and more millennials entering the field, the tech will become more and more involved.”
One North Carolina respondent predicted: “Twitter will rule since that is Trump’s favorite way to communicate. Also text communication will become the mainstay — more and more cloud technology.”
This comment staring into the crystal ball combined thoughts from a number of respondents:
“3D tour/ modeling will make big gains, but not quite make it to full market potential. Predictive analysis will also make good gains. New artificial intelligence ideas will start to bloom and Zillow will continue to push, maybe unveil some big surprises, maybe begin to offer contract support.”
There are still those out there doing it their own way without the help of social media.
This L.A. respondent said fervently: “There will be the beginning of a return to real estate as a person-to-person business because there is now too much competing technology and its effectiveness is being diluted. I had a great 2016 without doing any internet marketing besides allowing my listings to be on major portals.”
Some respondents are watching their local MLSs to see how they pick up on new opportunities.
“Technology is changing our industry fast. My biggest fear is that my MLS won’t play ball with [Broker Public Portal] and Upstream. I want to be ahead of the curve with the way search is changing. I hope that we do move towards a national MLS,” said this Chapel Hill respondent.
There is still a lot of “what’s that?” confusion about BPP and Upstream among agents, we found in our survey. More than 40 percent of respondents (Q19) didn’t know what BPP was, and 35 percent were mystified by Upstream.