A look into this year’s real estate market
Last year in 2015 we had seen some of the best statistics in years for the real estate market. A further increase in the number of sales along with an increase in the average sale price of homes showed that there was a lot of positive activity in the economy. So what is in store for 2016? We are just entering spring and signs are showing that we are trending towards a more “normal” real estate market. Let’s take a closer look at the details and forecast that Realtor.com has provided.
The source of Demand: Last year in 2015 we had seen Millennials making up a significant portion of the buyers that were active. Realtor.com had reported that Millennials accounted for nearly 2 million sales which translates into nearly ⅓ of all transactions for 2015. Forecasters project that this number will actually increase for 2016 due to the large group gaining more financial independence due to the improving economy.
Meanwhile, both Gen Xers and Baby Boomers will also be playing their part in the market. Gen Xers are will be looking to trade up to larger homes while the empty nesting Baby Boomers will be downsizing and heading to more urban areas in search of an active lifestyle for their retirement.
New Construction: As the demand has not decreased and the inventory is still tight, more building has been taking place to satisfy the need. A strong economy with credit access remaining attainable will help first-time home buyers. Builders are recognizing the size of this large group of buyers and are planning to develop the inventory to match the demand. Some of the developments that were started years ago or put on hold will also be coming to fruition as the market sustains its momentum and remains robust.
Mortgage Rates: Mortgage rates were supposed to increase last year in which they did, but they also had their dips. This year rates are expected to have a similar following with the year finishing out with a rate slightly higher than that of today. The increase will surely add an increase to the average monthly mortgage payment, yet the extra cost should not be substantial enough to hinder any buyers from entering the market.
A Normal Market: Years ago before our most recent recession supply and demand were somewhat in line with each other. In the past 10 or so years there have been some dramatic highs and lows as our economy has been adjusting. Today, many of the distressed properties have been swallowed up by buyers and new construction has been increasing. As this trend continues prices should also follow by showing a more “normal” progression in their increases.
Rental Activity: Currently, more than 85% of the United States have rents that exceed 30% of the income of renting households. With statistics like these, it has become more affordable to buy in more than three-quarters of the U.S than rent. Until we see rents stabilizing or more inventory is made available at lower rates, buying will be a more attractive option this year.