Time and time again, industry experts have said that, currently, the housing market is recovering, but that recovery is very slow. What can we expect next year in 2016? Lawrence Yun, chief economist for the National Association of Realtors, predicts that the housing market’s growth will continue to be slow going into next year.
At the organization’s annual conference, Yun explained that US home sales will barely rise next year – 5.4 million homes will be sold in 2016, up slightly from 5.3 million this year and existing home prices will rise by 4.6% next year, down from the nearly 6% rise this year. He added that rising interest rates, tight inventory and an increase in the number of people priced out of the market will all factor into the market next year.
Additionally, it is anticipated that the Federal Reserve will raise rates as soon as December, bringing 30-year mortgage rates to 4.5% in 2016 – up from 3.8% this year. However, the hike will be counteracted by the easing of credit score restrictions by Freddie Mac and Fannie Mae, which are also expected by the end of the year. According to Yun, “People slightly on the lower credit score will start to get approval. So that is a big compensating factor.”
Still, the historically low home ownership rate isn’t great news for working and middle class people, or millennials who are eager to move into their first home and not able to participate in the recovery. These millennials are also burdened with student loans. There was $600 billion in outstanding loans in 2005. The total is now at $1.3 trillion, which is a risk in the forecast for next year.
In some counties, like San Diego, construction has been ramped up, but it is doubtful that these new builds are for affordable housing. San Diego has suffered from a critical inventory shortage, with only 21,000 new homes being constructed since 2012 despite the creation of 101,000 jobs. Yun said he sees no meaningful construction nationwide for first-time home buyers with builders just focused on the high end. He laughed off the idea of the so-called tiny home movement, stating it made up less than 1% of home sales.
Do you agree with these predictions for the 2016 housing market? Where do you see the market headed next year?
Read the full story here: