We are leaving the year 2015 with one of the best years for housing since 2007. The good news is a bigger and brighter 2016 is in the forecast. Fueled by steady job growth in many parts of the country, the pent-up demand for buying finally broke out in 2015. This trend is expected to continue throughout 2016.
Here is the breakdown for what to expect for the upcoming year:
- Millennials make a move. In 2015, millennials represented 2 billion dollars in sales. They are expected to continue to be a large presence in 2016. Even with student loan debt, the National Association of Realtor’s data shows that millennials still view homeownership as a good financial investment and part of their American dream.
- Mortgage rates will climb. We’ve been fairly lucky with mortgage rates remaining historically low. This coming year, the 30-year fixed-rate mortgage will likely end nearly 60 basis points higher than 2015, or to as high as 5.1 percent. The markets with the highest home prices will see most of the effects.
- Healthy growth in homes sales and prices. Although we are coming off of a great year in home sales, 2016 will continue to have steady growth. New construction and distressed sales are expected to hit historical levels again and home prices are expected to rise at normal, but consistent, rates.
- Rental costs skyrocket. The cost to rent is expected to rise even higher in the New Year. More than 85 percent of the nation’s markets have rents that exceed the 30 percent of income rule. Buying a home is actually more affordable in three quarters of the U.S.
- New home construction makes a comeback. New home construction was at its lowest point in 2009 with developers scaling back nearly 79 percent. Single family home construction is expected to rise 23 percent in 2016 with new home sales expected to jump 26 percent.
- Buyers will start wanting green and smart homes. Eco-friendly features will be a growing demand for those who prioritize energy efficiency, a healthier indoor environment and durability. More than half of builders say they are currently working on green projects and that is expected to rise over the next couple of years.
In short, 2016 will be another year of stronger housing demand and sales. This will be fueled by continued job growth, job creation and increasing consumer confidence. More people are in a position to buy a home which is creating more demand. As long as supply can keep up, the housing market will continue to shine into 2017.