Ask almost any real estate agent, and they’ll probably tell you that 2015 was the best year for the housing market since 2007. According to a recent real estate forecast from the National Association of Realtors, 2016 may be even better. Here, you can learn about the five trends expected to dominate the real estate market in 2016.
#1 – Generational Buying
For years now, real estate analysts have predicted that today’s young adults will eventually make their way into the housing market. In 2015, millennials represented some two billion home sales, and they will continue to make up a huge chunk of homebuyers in 2016, according to experts. However, millennials aren’t the only major factor in the housing market for 2016. Generation Xers recovering from the 2008 financial crisis and baby boomers entering retirement are also expected to play a vital role in keeping the real estate market stable this year.
#2 – More Affordable New Construction
In years past, new home constructions were geared primarily toward the market. In other words, builders constructed houses that people who were already in the home-buying market wanted. Things like limited labor and climbing costs of land prompted these builders to focus on building luxury homes, but this is all set to shift in 2016. With many first-time homebuyers entering the market, and with improved access to credit among those first-time buyers, builders will begin to cater to that segment with more affordable new builds.
Experts believe that mortgage rates in 2016 will be volatile, at best. The Federal Reserve decided to guide interest rates a bit higher in January of this year, and this means that rates across the nation may begin to increase slowly but surely. However, according to some, these increases will be mitigatable, particularly among first-time homebuyers with newfound access to credit. It is the luxury home market that will see the effects of the higher interest rates the most due to increases in debt-to-income ratios and higher monthly mortgage payments.
#4 – A Return to Normalcy
Economists predict that 2016 will be the year that the housing market finally returns to normal after some 15 years of strange trends. The low mortgage rates spurred by the federal government after the housing bust have certainly done their magic, and people are back to buying homes at a steady rate. However, although 2016 will see some growth in the market, it will likely be at a slower pace than 2015.
#5 – Skyrocketing Rent Costs
Today, some 85% of the housing markets across the country have an average rental cost that exceeds 30% of the income of their households. While home prices themselves are finally leveling out, the prices of rent continue to climb in many areas – including small towns, where rental prices have been fairly low for the last decade or more. It is less expensive for families to buy homes in about 75% of the country, but for many of the households paying rent, homeownership is not an option due to limited savings and poor credit.
If you plan to buy or sell a luxury home in 2016, these trends may have an impact on the time it takes to sell your home and even your asking price. Remember that mortgage rates are set to increase steadily throughout the year, so the sooner in 2016 you buy or sell, the better.