This is the time of the year in which prognosticators prognosticate in an effort to show everyone that they are the smartest people in the room. Most of the time, they get it wrong. The reason why making predictions is so difficult is because you are ultimately trying to predict the behavior of people, which in itself is totally unpredictable.

In the spirit of being just as wrong as anyone else, I am going to offer up my predictions and thoughts for the upcoming year as they relate to the housing market.

The four big drivers in the housing market are demand, interest rates, inflation and labor. Of these four drivers, only one appears to be in favor of the housing market. The demand portion of the equation should remain good as more Baby Boomers retire and a new generation of homebuyers enter the marketplace. There’s little doubt that there are a lot of people in 2017 who would love to have a home of their own. However, it appears many of them will be denied this dream because of the lack of affordable homes, sagging wages and the inability to secure financing.

The American economy, especially the housing market, has been expanding on the crack cocaine high of low interest rates. The new Trump administration is promising a trillion dollars in infrastructure spending and a corporate tax reduction that could initially explode the national debt. While the payback could be good for the economy long-term, many experts believe it will usher in a period of much higher interest rates. This could quickly put homebuyers back in charge of the market as the pool of qualified buyers shrinks.

Material inflation directly impacts the housing market and the industry relies heavily on imported steel, lumber and building components. The new administration’s announced trade policies of punishing foreign manufacturers through tariffs that import products, which are also made in America, could create much higher prices and actually lead to shortages.

Since April 2005, Ro-Mac Lumber & Supply, Inc., has published its Whole House Commodity Index, which is used by construction related companies around the country. The Index measures the wholesale costs for structural materials to build a 2,200-square-foot home. Over the last 12 months, the Index has increased 4.8 percent, and this is primarily due to increased labor and regulatory costs. Commodity generated inflation could drop on housing like a ton of bricks.

Unemployment was at 4.6 percent and many pundits contend the number isn’t correct — it’s a farce. However, if you ask most people in the construction industry, they believe the unemployment rate is zero at times. Because of the Great Recession, the number of skilled workers in the construction industry has been decimated. Jobsites are seeing extended delays. If the new Trump administration launches a huge infrastructure program, I have one question — where will they find the workers?

What does all of this mean and what is my forecast for housing in 2017? First, the price to build a new home is going to increase, but the pricing for existing homes will probably go flat if interest rates continue to increase. A half-point increase since October is concerning. The time period to complete building a home will increase and there is little chance that building materials or labor will be cheaper by the end of the year. So if you are planning a project, the sooner you start, the more money you will save.

Higher interest rates are good for senior homebuyers, as many of them save their money and use cash to purchase homes. However, this will take time to filter into the economy. Locally, housing starts will probably slow to less than a five percent increase while nationally expect single-digit increases in new home starts in 2017.

A lot of change creates chaos and that will probably push some homebuyers to the sidelines. If you are selling a home — taking a good, fair price may be the best play instead of chasing a higher price later. One thing’s for sure, 2017 will be interesting.

Don Magruder is the CEO of Ro-Mac Lumber & Supply Inc. He is also the host of the Around the House radio show heard every Monday at noon on My790AM WLBE in Leesburg.