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Millennials stand to dominate the housing market in 2017, if market supply can keep up with demand for new homes. Above, a real estate sign advertised a new home for sale in Vienna, Virginia, Oct. 20, 2014. Reuters

With mortgage rates and home prices rising, the housing market has become more hostile to home buyers in 2016. But in the next year, major factors that influence the housing market stand to change both for the better and the worse. Read on for what people looking to settle down into a new home can expect in 2017.

Mortgage rates will soar.

Mortgage rates have been on the rise for nine weeks straight, with 30-year fixed rates reaching 4.32 percent Thursday, up from 3.47 percent at the end of October. The increase is a result of the Federal Reserve’s decision to hike its interest rate target in mid-December and the surge in U.S. Treasury yields over the past several months—both of which mortgage rates follow closely.

The rise in mortgage rates should continue through 2017, as Fed Chair Janet Yellen signaled plans to hike the federal funds rate target another three times next year as the central bank eases away from the near-zero rates it’s maintained since the recession, a move intended to help stimulate home buying after the crisis.

But prices likely won’t.

According to the S&P CoreLogic Case-Shiller National Home Price Index, average U.S. home values have toppled pre-recession levels. The index reached 185.06 in October, climbing from a low point of 134.01 in February 2012. The housing market research site Zillow’s Home Value Index indicates a similar trend, with average prices rising to $193,000 as of December from a nadir of $151,000 in February 2012.

But this trend is expected to slow in 2017. The Zillow index, which recorded 6.5 percent growth in home values over the course of 2016, predicted that growth rate would drop by more than half, to 3.2 percent, in 2017, sending the average home price to $198,000 by the end of next year. A study by home market information site Realtor.com forecasted a similar slow in the rise of home prices next year, to 3.9 percent from 4.9 percent.

Millennials will take over.

The Realtor.com study also estimated that millennials would make up a third of home buyers next year. A Zillow report indicated that half of home buyers are under the age of 36, nearly as many are first-time buyers and millennials “are the most likely to have plans to move in the next year.”

This trend would mark a turnaround from the past few years, during which living with parents surpassed all other housing arrangements among 18- to 34-year-olds for the first time in the modern era.

Getting a bigger mortgage will be easier.

In line with the rise in home prices over the past couple of years, the Federal Housing Administration announced Dec. 1 its decision to raise the cap on its loans in “most counties across the country” next year to $636,150 from $625,500 in 2016. (See if your county got an FHA loan ceiling increase here.)

FHA loans are popular among first-time buyers and people with lower credit scores, as they offer relatively miniscule down payments and cover mortgage insurance, protecting the lender from borrower default. Adjusting the price ceiling on these loans gives these new homebuyers—namely, the influx of millennials—a bit of leeway.

Demand stands to outweigh supply.

Part of the reason for rising prices has been a shortage in home inventories available to buyers, especially first-time buyers looking for starter homes. According to home market information site Trulia, the number of available homes dropped 9.1 percent over the past year, while the number of starter homes on the market fell 12.1 percent—the steepest decline in three years. As National Association of Realtors Chief Economist Lawrence Yun wrote in a Dec. 13 post on NAR’s site, the need to meet demand from the influx of young buyers will fall on the shoulders of construction companies.

“What is needed is for homebuilders to boost construction and for investors who bought for the purpose of renting to unload those rental properties onto the market soon,” Yun wrote, adding that, since landlords enjoy such high incomes from renting, they’re unlikely to sell to permanent residents. “The only way to bring additional supply, therefore, is for homebuilders to get really busy.”