Home Buying Predictions for 2016
2016 Should Be a Strong “Normal” Market
Home buying in 2016 will remain challenging for many borrowers. But the market should look closer to normal, as more homeowners who had been stuck underwater reach the surface and more first-time buyers find their financial footing. HOME PRICE APPRECIATION WILL SLOW. Industry experts expect home prices to continue to rise in 2016, but at a slower pace, somewhere between 3 percent and 4.5 percent nationally. In the expensive coastal markets, like New York and San Francisco, prices had been rising much more quickly, but that trend is not sustainable, said Ralph McLaughlin, a housing economist for the real estate website Trulia. “We are approaching a critical threshold on the costly coasts where the median household would have to spend 40 percent or more on the median-priced house,” he said. “That’s a signal that households will not rush to buy homes because affordability is pushing down on their ability to do so.”
Dallas Will Continue To Be Strong –
Expect a 125,000 Net Population Gain in 2016
Dallas-Ft Worth will reach almost 7 million in population by year-end. Expect more announced relocations from California and the Northeast. Expect more immigrating highly educated families from Asia and other parts of the world. Expect move up buyers, and more first time home buyers as Dallas attracts more Millennials. In short, expect 2016 to be a fantastic year. But don’t expect 10% to 15% home appreciation. Dallas housing prices are slowly stabilizing, and we should be back to a 3% to 5% annual home value increase.
A Strong First Quarter 2016
THE SPRING MARKET COULD HIT IN WINTER. Spurred by the expected rise in interest rates, buyers may come out earlier in the year than usual, maybe even in January and February. New York Times business forecasters agree that a “crazy spring market” could be in the offing for first quarter 2016r. . “Rates are going up, and buyers have seen prices rising and will want to get in before they go up higher,” notes the report. “In addition, what’s the alternative? Renting is becoming increasingly expensive.”
Buying Will Still Beat Renting
The expected rise in mortgage rates — by a half to a full percentage point by the end of the year — will not wipe out the financial advantage to buying over renting in the largest metro markets. The exceptions will be the costliest markets, mainly in California, where a rate rise to 4.5 percent or 4.75 percent could put home buying on par with the cost of renting. Rising rates may also dissuade some would-be sellers from putting homes on the market, continuing to starve markets hungry for inventory. “Some owners have refinanced at the lowest rates humanly possible, and they may be unwilling to give up that mortgage,” said Nela Richardson, a chief economist. “I think the biggest risk for the 2016 market is lack of inventory.”
Less Investors, More First Time and Move Up Buyers
THE MIX OF BUYERS WILL CHANGE. For the last few years, the buyer makeup has been somewhat “distorted,” Ms. Richardson said. “We’ve had a lot of investors in the market, and a smaller share of first-time buyers, at around 32 percent,” she said. That will change next year, she said, as the era of big bargains for single-family investors comes to a close and the ranks of first-timers grow. She noted that families that have been shut out of the mortgage market could be helped by some new government initiatives, like Fannie Mae’s HomeReady program, which will allow borrowers to qualify using income from other household members not listed on the mortgage or from non-occupant co-borrowers. Also, while the credit pendulum “is still swung on the side of being tight, and arguably too tight,” first-time buyers are responding to the reduction in insurance premiums on mortgages backed by the Federal Housing Administration, which require as little as 3.5 percent down, said Jonathan Smoke, the chief economist of Realtor.com, a real estate listing site.
- New York Times, December 24, 2016