Last month we recapped what a great year for home sales 2015 was, and we looked at the forecasts for 2016 sales. But what are some of the major trends that will influence Real Estate this year? Let’s make some predictions:
We’ve talked about it before, but we’ll say it again. Rents are ridiculous, and only going to go higher. In most areas of the country, rental increases are surpassing home price growth, making it more affordable to buy than rent. With such high rents though, it can be tough for new buyers to save enough short term, so it remains to be seen whether this will drive sales, or keep some buyers stuck in a rising rent cycle.
Moderation (or the return to Normalcy?)
“Everything in moderation”, as my father always said. (Except in rising rents). What do we mean? Expect moderate increases in home prices, and moderate rises in interest rates. In other words, a general return to “Normal” market conditions. Sustainable increases in home values, and modest rises in interest rates (from their record low starting place right now), are a good thing. These are the conditions we like to see in a balanced market, and after recovering a lot with the fantastic growth the past couple years, all signs point to a return to balance now after 15 years of more or less insanity.
A Focus On Home Builders
We’re probably going to hear a lot about an inventory crunch this year. And it’s up to the home builders to make something happen in 2016. Inventories are still at record lows, as home building has been up from the recession but still slow compared to historical averages. And homeowners have not been selling as much as new buyer demand has increased (despite the good prices they can get for a sale right now!) Look for the major home builders to begin to try catching up with the demand for homes later this year and give us some help with inventories. Also, building has been focused on higher cost homes and apartments lately, but expect construction of less expensive homes for first time buyers to increase going forward.
Different Generations Playing Different Roles
First time buyers are going to be big the next few years, as the Millennials begin to escape the rising rent trap, and move towards home ownership. Millennial demographics are huge for Real Estate’s future, and we’ll dive into them more in our next Blog, but don’t discount Gen X-ers or retirees either. Gen X-ers are entering prime earning years at a time when wage growth is back on the rise, and may be looking to move up, and Retirees may be looking to downsize or lower their cost of living. Both of these groups have a big influence as they are likely both buying and selling.
Well, that’s us looking into the crystal ball. Now it’ll be interesting to see how big of a role each of these factors will play in our industry this year. Check back in with us for updates, and contact us with questions, or for any of your Real Estate needs!
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