Over the past year, California has seen a strong seller’s market for housing – thanks in large part to a shortage of homes on the market, strong demand by buyers and mortgage interest rates that hovered near historic lows. But as 2017 gets underway, the question is whether that seller’s market will continue, especially given a recent uptick in interest rates.

According to Freddie Mac, the average 30-year fixed-rate mortgage nationwide climbed to 4.16 percent in mid-December (the latest figures available), up more than a half a percentage point just since the November presidential election. Economists say the increase is due to more optimistic economic growth projections, higher-inflation expectations, and the Federal Reserve’s recent rate hike.

Although mortgage rates remain relatively low by historical standards, the sudden increase in rates is one of several factors that could impact the housing market in the coming year: Will low inventory levels begin to rise? With the job market remain strong and continue to grow? What impact will the new Trump administration have on the housing market and the economy?

All of those factors could play a role in how the housing market shapes up in the new year.

A panel of industry economists in a recent article in Inman News, the national real estate trade publication, said they generally expect 2017 will remain a seller’s market in much of the country. But they believe that trend could begin to give way to more favorable conditions for buyers in 2018 and 2019.

“2017 is probably going to skew more toward the seller’s market,” Svenja Gudell, chief economist at Zillow, told Inman. “Most markets will skew more toward seller’s markets, and even in the Midwest there are probably more seller’s markets than buyer’s markets compared to their own history.”

But Jonathan Smoke, chief economist at realtor.com, said the three laws of real estate – location, location, location – will be ever more important this year.

Markets in the western U.S. have seen the most significant price appreciation, making it difficult for first-time buyers to find success. Smoke expects that trend to continue, but sees great variations geographically – even from city to city and neighborhood to neighborhood in a particular market.

“We’re seeing some clear patterns emerge within markets — one might be slowing down and cooling off where another part is really heating up,” he told Inman. “Real estate is so local that I would argue that a neighborhood view is really where you can see the differences and disparities and changes that are occurring around the country.”

The economists did project that inventory levels will likely rise in 2017 and new construction will pick up as well, giving frustrated buyers a bit more to choose from.

The upshot is that sellers might find that it will take a little longer to sell their property this year than it did in 2016. However, the increase in listings and construction probably won’t be enough to offset pent-up demand from buyers as long as the job market remains strong.

The National Association of REALTORS® publication, realtor.com, said the days of multiple offers and bids well over the asking price probably won’t go away in 2017 – although they may not get much worse from a buyer’s standpoint.

Citing rising mortgage rates and a shortage of affordable homes for sale, realtor.com projected a smaller increase in sales in 2017 than last year and slightly slower price appreciation of about 4 percent on average nationally, down from 5 percent in 2016.

“2017 will be a year of growth in both sales and prices, but that growth will be slower than what we’ve seen over the last three years,” according to Smoke.

Much of what happens in the coming year could depend on how high mortgage interest rates go. Smoke projects 30-year fixed mortgage rates to rise to 4.5 percent in 2017, while Gudell of Zillow expects a peak rate of 4.75 percent following additional Fed rate hikes.

No one knows for sure what will happen to interest rates or the housing market. But if you have been thinking about buying or selling your home, now may be a good time to make your move before rates go higher and while demand for housing remains strong.

Coldwell Banker Real Estate is continuing its efforts to be the smart home leader in real estate. This month, Coldwell Banker Real Estate teamed up with Vivint Smart Home to conduct a survey on the types of smart home technology consumers want and the smart home trends they expect to see in 2017.

The survey revealed that the vast majority of Americans who have smart home products – controlled remotely by a smartphone, tablet, computer or by a separate automatic system within the home itself – want voice control. The survey also found that an increasing number of consumers are already using voice control.

According to the survey results, a whopping 72 percent of respondents with smart home products said they wanted voice control. Another 48 percent of Americans with smart home products already have voice control capability.

What systems and products do consumers want to control using their voice? More than half of Americans who own smart home products with voice control use the feature to control entertainment, such as playing music, televisions and speaker systems. In addition to entertainment, the next three most popular functions being controlled by voice activation for smart home product owners are lighting, security products and shopping (all tied at 33 percent).

“We’re not surprised that so many Americans want to be able to use their voice to control smart home products because it makes for a much more intuitive user experience,” said Sean Blankenship, chief marketing officer of Coldwell Banker Real Estate LLC. “As the smart home leader in real estate, Coldwell Banker is at the forefront of smart home trends and we’re hearing directly from our agents that their clients are demanding voice control to make their smart home experience more seamless.”

Voice controlled smart home products were a significant part of the 2017 Consumer Electronics Show (CES®) in Las Vegas, which kicked off January 5 and concluded on January 8. Coldwell Banker was proud to participate in CES once again, even broadcasting live on Facebook from the CES show floor. The company was the only real estate brand to have a presence in this pre-eminent consumer technology conference which drew thousands of exhibitors and product launches from more than 3,800 companies. To see the live broadcast and more coverage from the Coldwell Banker team on the ground, make sure to visit ces.coldwellbanker.com.

Advances in smart home technology are something to watch in 2017.

Here’s what our local Northern California offices had to say about market conditions as we closed out 2016:

East Bay – In Pleasanton, Walnut Creek and the surrounding areas, listings were somewhat steady with some slight declines and sales activity was off. One factor that is being closely monitored throughout the region is the uptick in mortgage interest rates which can affect affordability for many buyers. The rise in rates will either spur buyers to make a move before further increases or may deter sellers from putting their homes on the market who are enjoying lower interest rates and fear having to obtain loans with higher rates—which all puts more pressure on the market.

Lake Tahoe & Truckee –  2016 ended on a fairly high note. The company consistently led the market in terms of listings and sales in the region, according to our office manager in the region. Inventory levels were approximately 10 percent lower than 2015, and the high point for listings was in late June, when 840 properties were listed for sale in the region. We ended the year with 514 available listings. Luxury sales increased, with the sale of $1 million-plus properties shooting up 49 percent. (280 sales in 2016 vs. 187 sales in 2015). Sales prices in the high-end of the market, however, eased with the median sales pricing decreasing 5 percent to $1,536,875 from $1,622,5000 in 2015.

North Bay –  Sales and listing inventory were steady in some areas and lighter in others to close out the year. The Greenbrae office had 15 properties under contract, but inventory and sales overall were lighter compared to the rest of the year as both sellers and homebuyers were preoccupied with the holidays. But the market was surprisingly active in our Santa Rosa Mission office, and the Previews market was experiencing about the same pace as a year earlier in terms of closed sales and listings, according to our local manager in that area. Our Novato office manager reported a drop in sales and listings, with three accepted offers in the last two weeks.

Placer County – Sales and listings fell during the last two weeks in the area, with consumers pausing to focus on holiday festivities. Listing inventory is still limited, with a low number of homes priced below $400,000 available for sale, according to our Auburn office manager.  Despite the slowdown, there were three multiple offers and 12 properties that went under contract in the Auburn office. A number of homeowners have indicated they are waiting until after the holidays to put their homes on the market, so the Auburn manager expects an increase in listings in coming weeks. One area of concern is that appraisals are still coming in lower than the purchase price, according to the Auburn office manager, and last-minute contract cancellations are occurring. The higher-end of the market was also slow, with buyers being very specific about what type of property they are seeking, and with additional properties expected to come on the market this month.

Sacramento County – Restricted inventory remained an issue in the region. Sacramento County’s inventory was down 40 percent in December, compared to the same month in 2015, with just over a month’s worth of inventory, according to our Elk Grove office manager. The average price stood at $331,000 and demand has been strong but sales were off by more than 7 percent, he said. There was a particular lack of inventory of homes priced under $350,000, according to our Sacramento Fair Oaks office manager. Still the Fair Oaks office recorded 17 accepted offers and had 7 multiple offers during the last 2 weeks. Our Folsom office saw increased sales activity, with 14 properties under contract. 

San Francisco –  While a slowdown in activity isn’t unusual during the holiday season, our Pacific Heights office manager observed a bump-up in listings and sales, with 9 properties going under contract. Heading into the 2017, it will be interesting to see whether the new administration’s policies will have any significant impact on the region’s housing market.

San Francisco Peninsula – The holiday season was affecting the local market, as consumers focused on the holiday hustle and bustle. There was a decrease in the number of for-home sales, as well as a dip in sales activity in the area, with the Palo Alto downtown and Redwood City offices reporting 2 properties under contract each. Demand appears to be healthy, however, as there were multiple offers on all 6 properties that went under contract in the San Mateo downtown office.

Silicon Valley – There was some mixed news about inventory and sales activity in the region. Our Los Gatos manager shared positive news for home searchers, saying that listing inventory was up slightly while sales activity was steady. There were 35 homes available for sale over the last two weeks, which is up from 27 homes during the same period last year. The office also juggled 20 multiple offers. Meanwhile our San Jose Willow Glen office saw steady sales activity, with buyers coming off the fence to make those year-end purchases and multiple offers on practically all of the office’s in-house listing that went well over asking price. Several agents affiliated with the San Jose Willow Glen office wrote offers for buyers who experienced sticker shock with both the amount of offers on each property and how much over their asking price they went, according to our local manager. Most offices in the region were reporting that listing inventory was down over the last two weeks. The low inventory and holiday season likely affected sales activity in the last two weeks of 2016 in both our Cupertino and San Jose Almaden offices, with both revealing a decrease in sales activity. The limited inventory also likely led to three multiple offices in the San Jose Almaden office, with the manager saying it was surprising that 7 properties went under contract given the low number of listings. But activity will likely pick, as our Cupertino manager pointed out that agents have many prospective buyer clients who are waiting for new inventory to the come on the market. Most homeowners are likely waiting until after the Super Bowl to list their homes for sale, she said.

South County – Market conditions shifted with listing inventory experiencing a significant decline. In all of Morgan Hill there were only 32 active listings, while Gilroy had 62 listings. Agents are dealing with a restricted supply that’s not nearly sufficient to meet buyer demand, according our Gilroy and Morgan Hill office manager. Some buyers have been frustrated by the lack of inventory and are anxious to secure a property since mortgage interest rates appear to be on the rise.

Market Watch is a bi-weekly column by Coldwell Banker San Francisco Bay Area and Sacramento-Tahoe president Mike James exploring the local Northern California housing markets. Click here to view past issues.