By Laura Kusisto

Before the presidential election, economists anticipated the housing market would continue its steady recovery in 2017. Growth in home prices and sales likely would slow after a four-year run-up, but new construction likely would pick up, bringing relief to those struggling to find affordable homes.

Most economists still hold to those predictions, but they now say Donald Trump's victory could upend the market. As investors bet on faster growth -- tied to tax cuts and higher infrastructure spending -- mortgage rates have risen to 4.16% from 3.54% before the election, figures from mortgage giant Freddie Mac show.

If rates continue to rise quickly, it could make it more difficult for new buyers to afford homes and create a disincentive for current owners to sell their homes and give up ultra-low-rate loans.

Changes to immigration policies under a Trump administration also could put a damper on the market by exacerbating a shortage of workers to build new homes and by reducing the number of new households being formed. "If you pull back on immigration, you pull back on housing," said Mark Zandi, chief economist for Moody's Analytics.

On the other hand, economists said paring financial regulations -- along with a stronger economy overall -- could also give the housing market a lift.

Lawrence Yun, chief economist at the National Association of Realtors, expects mortgage rates to rise to about 4.5% next year, which he said won't be enough to dampen demand. He expects the volume of existing home sales to increase slightly, by 1% to 2%, but said the pace could accelerate or turn negative depending on various policy changes.

"Under a Trump presidency, he relishes unpredictability so there is a wide variance in the forecast outlook," he said.

David Berson, chief economist at Nationwide Insurance, expects home-price growth to slow slightly to 4.8% from about 5.3% this year. Next year he expects conventional 30-year fixed-rate mortgages to rise to 4.65%, which won't be enough to hurt the market. But by 2018, rates could start crimping demand, he said.

"Rates can rise by enough to choke off the housing market," Mr. Berson said. "I think we're still a long way from that."

Mr. Zandi expects housing starts to rise to 1.4 million from about 1.2 million this year, an important boost to a market starved for new supply.

Write to Laura Kusisto at laura.kusisto@wsj.com

(END) Dow Jones Newswires

December 18, 2016 23:04 ET (04:04 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.