10 Real estate market trends for 2016

It's been a great year for real estate, both nationally and in our own Sacramento region, but what will 2016 hold? Here are 10 trends analysts,  economists, and housing experts expect to see this coming year. Look for part two of this blog, with trends 6-10

1. Baby Boomers are making changes

Everyone is talking about the Millenials in real estate and the impact they will make on the housing market in years is undeniable, but don’t forget about the Baby Boomers. America’s 55-74 year old generation is expected to start selling their bigger, traditional homes and opt for smaller, more manageable living arrangements. Town homes, condos, shared housing, etc. better fit their needs, including dwellings that are easy to manage, have less stairs, enjoy built-in communities with others like themselves, and close access to medical facilities and public transit.

2. Supply and demand balance

Right now, there is a run on demand for affordable housing, yet supply levels are still below average. But as the banks continue to process and release their inventory from the recession and the ripple of foreclosures, inventory is expected to rise. In addition, buyers may still want to buy, but a small number will be priced out thanks to higher payments from increased interest rates, causing a net effect of balancing supply and demand.

3. Millenial buying power

The group that has the ability to stoke the fires of the housing market is the Millenials, those 80 million Generation Y’ers between 18 and 34. They’ve largely been on the sidelines of home ownership because of reluctance to get burned like so many did during the Great Recession, and more so an inability to save or qualify because of record levels of student loan debt and stagnant wages. But this is the first year the Millenials are expected to start maturing into home buyers in large numbers (six out of Millenials surveyed expect to live in a detached single-family home within five years or less), which will keep demand for entry level, affordable housing high. Those older Millenials who already bought their first home years ago are also expected to sell and look to move to the suburbs as they start families and enjoy stable careers.

Sacramento Housing Market Statistic:

Millennials now make up about a third of the home buying market and roughly about 30 percent in the Sacramento region.

4. Coastal markets slow, Rust and Tobacco Belt heat up

In past years, coastal markets such as San Francisco, San Diego, San Jose, Boston, Washington D.C., and New York have been white hot, but this is the first year we could see a cooling of those real estate numbers. No one is expecting any sharp decline but the insane purchase prices and rents can’t keep climbing forever in those areas, so there should be a dip in appreciation, though it will likely still be positive.

Meanwhile, buyers are still looking for those pockets of affordability around the country and aren’t afraid to relocate as long as there are jobs in those areas. As the overpriced coastal and large metropolitan markets in California and the Northeast take a slight step back in 2016, housing in the Midwest, Texas, and places like North, South Carolina, and Virginia and other areas of the south will become the new housing haven. Baby Boomers are looking to downsize and spend a fraction of what they did in bigger cities while capitalizing on great communities with amenities, while young families in increasing numbers want to escape the prohibitive costs in larger seaboard cities.

5. New home construction reintroduces itself

A profound change in the housing marketing in 2016 will come from the reintroduction of new home construction across the U.S., and particularly in markets that have been severely underserved in the last five years, including our own Sacramento. In fact, Sacramento will rank number four in the nation for new home starts in 2016 behind only Providence, Rhode Island, St. Louis, Missouri, and San Diego. Analysts predict a 12 percent increase in new home starts in 2016 compared to a year earlier, and total new home sales to grow 16 percent over the same period.

Real estate market statistic:

In 2016, total sales for existing and new homes are expected to reach 6 million for the first time since 2006.