A healthy growth in home sales and prices was expected, but it will be at a slower pace than in 2015. However, this sluggish pace is not an indication of an issue. It is just a return to normalcy. It has been 15 years of abnormal trends and after the devastating effects of the housing bust, signs of more normal conditions are appearing.
The following are other trends that are expected to have the greatest impact on the housing market in 2016.
- Millennials will make 2016 the best year to sell. Millennials came out as the most dominant force in 2015, taking up almost 2 million sales, which is about one-third of the total. This trend is expected to continue in 2016 as their vast numbers combined with improving financial conditions will enable more buyers between ages 25 and 34 to again move the market, House reported.
- Builders will opt for more affordable prices. An aspect of housing that has yet to recover is single-family construction. Facing limited labor, worries about depth of demand, and higher land costs, builders have turned to producing more costly housing units for a specific pool of customers. This has caused new home prices to be higher than existing-home prices. This is expected to change in 2016.
- Increasing mortgage rates will greatly affect high-cost markets. Mortgage rates went up in 2015, but they also went back down. A similar volatility is expected in 2016, but the push by the Federal Reserve towards guided interest rates is expected to result in a more stable upward trend in mortgage rates. However, in the U.S., the effect will be limited as the move to higher rates will force more existing homeowners to sell and buy before rates go even higher, Nuwire Investor reported.
Finally, the already-costly rents will go up more. The housing crisis that politicians are continuing to ignore will cause rental housing to become even more crushing in many parts of the country.
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