Exciting 2016 forecast: ‘Normal’ real estate market
CHICAGO – Jan. 5, 2016 – This year may have been the best for housing since 2007, but the market will likely get even rosier in 2016, according to a recent real estate forecast by realtor.com®.
One of the main drivers behind the brighter 2016: The projection that employment will continue to grow, which will add to consumers' wallets and allow them to purchase their first home or upgrade to a new one.
Realtor.com housing predictions for 2016:
1. 'Normal' is coming
New construction and distressed sales are expected to return to more historic levels, and home prices are expected to follow at "more normal rates consistent with a more balanced market."
2. Generational buying trends shape up
But two other generations will also have a big presence in 2016: financially recovering GenXers and older baby boomers entering retirement, realtor.com® notes.
"Since most of these people are already homeowners, they'll play a double role, boosting the market as both sellers and buyers," Smoke says. "Gen Xers are in their prime earning years and thus able to relocate to better neighborhoods for their families. Older boomers are approaching (or already in) retirement and seeking to downsize and lock in a lower cost of living."
3. New-home construction focuses more on affordability
In 2016, they'll likely shift to more affordable products to cater to the entry-level buyers. "We are already seeing a decline in new-home prices for new contracts signed this fall," notes Smoke. "In addition, credit access is improving enough to make the first-time buyer segment more attractive to builders."
4. Higher mortgage rates
"That level of increase is manageable, as consumers will have multiple tactics to mitigate some of that increase," Smoke says. "However, higher rates will drive monthly payments higher, and, along with that, debt-to-income ratios will also go higher." The markets with the highest home prices will see the effects most.
5. Rents to go up even higher
"Rents are accelerating at a more rapid pace than home prices, which are moderating," Smoke says. "Because of this, it's more affordable to buy in more than three-quarters of the U.S. However, for the majority of renting households, buying is not a near-term option due to poor household credit scores, limited savings, and lack of documentable stable income of the kind necessary to qualify for a mortgage today."
Source: "The 5 Real Estate Trends That Will Shape 2016," realtor.com (Dec. 16, 2015)© Copyright 2016 INFORMATION, INC. Bethesda, MD (301) 215-4688