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Top 5 Real Estate Market Trends For 2016

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The past year may have been the most successful rebound for the real estate market since 2007, but the best is yet to come. According to most experts the forecast for the real estate market for 2016 remains strong based on reports from realtor.com®.

One of the major catalysts behind the real estate rebound is that fact that employment will continue to grow. This will give consumers more money in their pockets and more buying power. First time buyers will have increased opportunity to buy their dream home or upgrade their existing home. Here are the top real estate trends according to Realtor.com® for the 2016 market year.

1-Normal market conditions are soon expected:

According to realtor.com®’s chief economist Jonathan Smoke, the market is returning to normalcy. Although the growth in home sales and prices will be markedly slower than 2015, this slowdown isn’t a problem. This trend is returning the “normal” market and it’s a trend that figures to continue throughout 2016. According to Smoke; “We’ve lived through 15 years of truly abnormal trends, and after working off the devastating effects of the housing bust, we’re finally seeing signs of more normal conditions.”

The number of distressed sales and new construction are expected to return to levels unheard of since 1997. Home prices are also expected to continue to climb at “more normal rates consistent with a more balanced market.”

2-Millennials coming into their own

Young adults played a huge role in the turnaround in 2015, and they are expected to carry the torch in 2016. Millennials made up roughly 2 billion sales the previous year, which accounts for one-third of the total home buyers. This figures to build in the upcoming year, with the majority of first time home buyers to fall between ages 25 and 34.

But that generation isn’t the only one to make their mark on the 2016 real estate market. GenXers and older baby boomers who are slowly recovering economically also figure into the equation. This generation will be entering retirement, and will be looking to expand the real estate market this coming year according to realtor.com®. As most of this generation already owns a home, their effect will be two fold both boosting the market as buyers and potential sellers.

Gen X’ers and baby boomers will be in their prime earning years and will be well equipped to move into better homes for their families. Many of the baby boomer generation will already be in retirement and possibly looking to sell and lower their cost of living.

3-New Homes are built to be cost-efficient and affordable

Newly constructed homes are built with a higher degree of efficiency. Cost efficient methods and materials have lowered the entry-level market price point. New construction locations have targets higher-priced homes, and lower price points for entry-level buyers. Because of this reason companies have shifted their focus into producing more higher priced homes. This means that new homes are more valuable than the typical real estate transaction.

The current trends show that in 2016 they will continue to build homes that are geared towards entry-level buyers. This increase in supply as well as changes to the credit process has made it easier than ever for first time buyers to get the price they want. According to realtor.com® these changes have led to lower prices for new-home contracts signed, making new homes more attractive to builders and first time buyers alike.

4-Higher mortgage rates

The upcoming year projects mortgage rates to be much more volatile moving forward. The Federal Reserve has recently moved to boost interest rates, which in turn could make mortgage rates higher than they have been in recent years. In fact the new 30-year fixed rate mortgage could be around 60 basis points higher in 2016.

Although buyers could use several tactics to help mitigate some of these increases, it’s a good idea to be prepared. These higher percentages will result in higher monthly payments and increased debt-to-income ratios. Homes that cost more will also be significantly affected over homes that are at a lower price point.

5-Rent will increase

Rental rates are going to skyrocket in 2016 as the increase in mortgage rates will pass down to the renters. There are more than 80 percent of the nation’s rental markets will have rent prices that exceed 30 percent of the renting households income.“Rents are accelerating at a more rapid pace than home prices, which are moderating,” Jonathan Smoke says. “Because of this, it is more affordable to buy in more than three-quarters of the U.S.”

Even so buying is still not a reality for the majority of renting households. Whether this is because of the financial circumstances or the lack of qualifying credit scores, the majority of renters won’t be able to buy a home in the near future. Other factors such as a lack of documentable stable income or instable savings can make it difficult to qualify for a mortgage.

Top 5 Real Estate Market Trends For 2016

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