Last week, the Federal Housing Administration (FHA) announced that it has reduced its annual mortgage insurance premiums (MIPs) by .25% for the majority of borrowers. This rate cut will apply to all FHA-backed mortgages that close on or after January 27 and, on average, is expected to save borrowers $500 throughout 2017.

Since election week in November, increasing mortgage rates have dominated news headlines throughout the country. What most people don’t realize, however, is that home prices and mortgage rates aren’t the only spiking costs in today’s economy—the cost of rent has drastically increased as well. 

According to our last article, “Next Year’s Perspectives on Housing,” 2017 is going to be full of home buying opportunities. Mortgage rates remain lower than the previous decade, homebuilder confidence is high, and home buyer sentiment has stayed strong. One element of the housing market, however, has drastically changed within the past year: the nation’s homebuyers. Not only is the demographic of buyers shifting, but also are their home buying concerns and priorities. Let’s take a closer look at what you need to know about today’s homebuyer.

According to the Mortgage Bankers Association, next year will be full of home buying opportunities, especially when compared to the past few decades of mortgage history. Three factors in particular will make the year’s housing market a great time for the nation’s current and potential homebuyers. Let’s take a closer look at next year’s mortgage rates, demographics, and homebuyer sentiment.

According to the National Association of Home Builders’ Housing Market Index, home builders witnessed a substantial boost in homebuilder confidence after President-elect Donald Trump won the election in November. Although builder sentiment has remained steady within the past couple of months, this seven-point spike in confidence has mortgage experts particularly eager for what’s to come in the housing market next year.

According to Nela Richardson, Chief Economist of Redfin, a typical house stayed on the market for 52 days in 2016—that’s the shortest time documented since Redfin’s 2009 records, and 2017 is expected to beat this as the fastest market on record. With newly advanced technology and a steady rise in demand throughout the country, experts predict that next year’s housing market will enliven homebuyers in nearly every state. Let’s take a closer look at next year’s forecast.

1. Homes will spend less time on the market: In Redfin’s latest report, Richardson highlights that “the next generation of real estate technology will see a shift in innovation from online listings to hardware and real-world services that increase the efficiency of real estate transactions.” This means that potential homebuyers can expect quick and easy access to an online offer, which will significantly expedite the home buying process. 
2. The housing market will continue to grow, but slowly: In the past four years, the percentage of affordable homes in the nation’s largest cities, based on median income, has continuously declined. Although affordability pressure is expected to slightly grow throughout the next year, existing home sales are predicted to increase by 2.8 percent. In addition, housing inventory will begin to recover, increasing 1.7 percent within upcoming months.
3. Construction growth will slow: According to a Redfin study, nearly one in four construction workers is foreign-born. This means that with stricter immigration policies, construction labor shortages may slow new construction-growth to a mere 6 percent in 2017.
4. Mortgage rates may increase, but not by much: Yes, mortgage rates may climb in 2017—but not to unaffordable levels. In fact, Wall Street has recently expressed great optimism that next year’s economic growth and levels of inflation will keep mortgage rates low.  
5. Home loans will be accessible to more people: This year, large financial institutions introduced mortgages requiring down payments of as little as 3 percent. In addition to continuing this trend throughout 2017, we can expect an increase in home loan accessibility to more people.
6. Millennial homebuyers will move to second-tier areas: As we recently discussed in the article “Suburbs are Surpassing Cities in Growth,” many millennial and first-time homebuyers have moved to suburban areas to find lower cost housing alternatives—and 2017 will be no different.

According to Fannie Mae’s latest National Housing Survey, 93 percent of millennials aged 25 to 34 hope to buy a home in the near future. This means more first-time homebuyers are preparing themselves to enter the housing market; but with such a clear demand for homeownership, why haven’t they yet switched from renting to buying?

Although mortgage news throughout the country has focused on the waves of young millennials moving to urban areas, the Urban Land Institute’s Terwilliger Center for Housing’s latest report suggests that the suburbs have actually surpassed cities in growth.   

Since election week, mortgage rates have risen nearly half a percentage point—spiking 30-year fixed home mortgage rates to last year’s levels. Investors throughout the country began selling bonds to honor the President-elect’s mission to lower taxes, encourage deregulation and invest in various infrastructure projects. With increased government spending, we may expect higher inflation to continue yielding higher interest rates in years to come. Let’s take a closer look.

This week, the Federal Open Market Committee held its monthly meeting to discuss the state of the nation’s interest rates. According to Janet Yellen, Federal System Chair of the Board of Governors, the Committee decided to forgo raising interest rates to help the U.S. market recover from the impact of Brexit. In fact, the Federal Reserve may even wait out raising rates until after the election.