As this year comes to a close, we look back on a real estate market of low inventory and high prices that have put many buyers on the fence about buying a home. However, next year things may fall into place to create a market where buyers can make a big purchase.
Buyers who have been priced out of the market may finally get a chance to jump in come 2016 – the rise in prices is expected to slow down next year. According to Zillow’s Chief Economist Svenja Gudell, prices are expected to rise 3.5%, resulting in a possible flood of buyers. Jonathan Smoke, chief economist at Realtor.com, said, “We have the potential for about six million home sales just through the months of April through September; that is basically impossible to do.”
But not everyone will be able to take advantage of next year’s market conditions. Despite the slowdown, Zillow still expects home values to outpace wage growth, which can make it difficult to afford a home, especially for lower-income buyers. Plus, prices in the country’s hottest markets, like San Francisco, Boston and New York City, aren’t expected to pull back next year.
The slowdown in home prices will encourage owners to list their homes and give buyers more choice. In addition, the new home market is also expected to grow in the coming year with builders focusing more on starter and middle-range homes, which will also boost inventory and make things easier for buyers. With more homes on the market, bidding wars will become less common and prices could ease even more.
In the new year, there will still be the opportunity to take advantage of historically low interest rates, so the sooner buyers act on the rates now, the better. “You are likely to get the best rate you will possibly see, perhaps in your lifetimes through the majority of next year, but certainly, the earlier the better,” said Smoke.
While buyers may continue to decide between buying and renting into the new year, rent prices are expected to continue to climb in 2016, which means in most cities, buying will be cheaper than renting, even though mortgages could get more expensive.
Do you have your own housing forecasts for 2016?
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