Morning Briefing: Softening of hot markets in 2017 says report

by Steve Randall06 Jan 2017
Softening of hot markets in 2017 says report
Some of the hottest US housing markets are predicted to soften during 2017 according to a new report.

Mortgage tech firm Veros Real Estate Solutions says that the national picture should see a 3.7 per cent rise in home values, up from 3.5 per cent in the last quarter of 2016.

However, continued softening of markets in South Florida and the Bay Area is forecast. Those markets would remain above the national average though with around 4 per cent in Miami and Fort Myers and 5 per cent in San Francisco and San Jose.

“Although we expect to see interest rates increasing and inflation ramping up, the overall labor market is expected to remain strong. These effects will essentially offset each other, and allow the overall national forecast to remain strong, and consistent with what has been predicted and observed in previous forecast updates,” says Eric Fox, VP of Statistical and Economic Modeling at Veros.

Some markets will continue to see price decreases led by Poughkeepsie, NY, down 2.5 per cent; Binghampton, NY, down 1.9 per cent; and Atlantic City, down 1.8 per cent.

The overall proportion of markets with declining prices is forecast to drop from 7 per cent in the fourth quarter of 2016 to 4 per cent during 2017.
 
Washington DC out of favor for these buyers
The US is still a hot market for foreign investors but Washington DC has dropped out of the top 5 cities-of-choice after 25 years.

A survey of members of the Association of Foreign Investors in Real Estate (AFIRE) keeps New York as the top US city among foreign investor. Los Angeles, Boston, Seattle and San Francisco complete the top 5.

For global cities, New York also hits the top spot followed by Berlin, London, Los Angeles and San Francisco.

Generally the US is seen as a good place to invest in real estate but the AFIRE survey reveals some concerns.

“As uncertainty rises with a new government in Washington and interest rates that have risen dramatically, it is no surprise that investors have signaled a note of caution,” said James A. Fetgatter, chief executive officer, AFIRE. “Previous, comfortable spreads between cap rates and interest rates have narrowed making the investment criteria more selective and difficult. Increased market research and discipline will be required.”  
 
Office, industrial real estate set for continued strength in 2017
Activity for commercial brokers and mortgage lenders should remain buoyant in 2017 due to strength in the office and industrial property classes.

A report from global real estate firm Cushman & Wakefield predicts a stronger US economy this year following a turbulent 2016. The growth will, it believes, be boosted by the Trump administration together with the Republican-controlled House and Senate.

“Even before the election, the U.S. economic fundamentals were showing signs of heating up,” said Kevin Thorpe, Cushman & Wakefield’s Global Chief Economist.

For offices, the strong labor market is predicted to see absorption increase with vacancy rates remaining stable before increasing in 2018. Retail space, especially in malls and lifestyle centers is likely to be impacted by an upswing in eCommerce however, this continued shift in consumer choice will increase demand for warehouse space.
 

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