While 2015 was a good year for the housing market when compared to the previous six or seven years, real estate experts, economists and investors are expecting 2016 to be even better. Across the country, industry professionals are gearing up for what could become the healthiest housing market of the decade. Let’s take a look at some of the top predictions and what they mean for homeowners, buyers, sellers, investors and everyone in between.
Millennials Become Homeowners
While plenty of millennials purchased homes in 2015, the belief is that this will be the year a large number of millennials move from rental properties to investing in their own single-family homes. Mathew Gardner, chief economist of the Seattle-based Windermere Real Estate, believes this is true for a number of reasons.
For starters, Gardner believes many millennials are starting to settle down with families. Roughly one quarter of all millennials will fall into the 30-plus age range this year, which is about the time many people start thinking about having kids and purchasing a home. And with confidence growing in the housing market, he believes you can even expect younger millennials – perhaps around the age of 24-26 to start purchasing homes as well.
This will be furthered by the fact that rent will continue to rise and baby boomers will continue to sell as a result of downsizing. All of which will provide a solid supply of affordable housing.
Investors Seek Long-Term Holds
Certain Markets will Really Take Off
There will always be hot markets, regardless of what’s happening on a macro level. In 2016, Zillow chief economist, Svenja Gudell, points to three in particular. “Next year, the combination of unemployment, population growth and the home value growth will make markets like Boise, Idaho, Salt Lake City, Utah, and Omaha, Nebraska, stand out,” she said in a recent interview.
New Home Construction
It’s pretty challenging to find new homes in most markets. New home construction has been rather stagnant lately, but that could change this year. But don’t expect to see the same kind of construction that we saw in the late 1990s and early 2000s.
The higher end trend is moving towards building larger homes on smaller lots, since land is fairly expensive in many parts of the country. With that being said, most new construction will be geared towards affordability. Developers and builders understand that first-time buyers represent a large percentage of the market and will attempt to cater to this segment.
Volatile Mortgage Rates
Experts believe mortgage rates will be anything but stable this year. The recent decision by the Federal Reserve to nudge interest rates higher will likely push mortgage rates higher over time. However, the fact that we’re coming off historical lows means these increases won’t break the bank for most homeowners. The markets with the highest home prices will probably see the most dramatic effects.
Optimism Remains for 2016
When you talk to most industry professionals about the real estate market in 2016, they get a bit of a twinkle in their eyes. It’s a cautious twinkle, though. With the way things have gone over the past decade, it’s difficult to get excited. That is, until we start seeing results. The good news is that it appears we’re poised for a promising year of growth.