It's been a great year for real estate, both nationally and in our own Sacramento region, but what will 2016 hold? Here are five more trends that analysts, economists, and housing experts expect to see this coming year. To read part one of this blog with trends one through six, click here.
6. Interest rate rise stabilizes growth
6. Interest rate rise stabilizes growth
We all know by now that the
Fed just raised their benchmark rate by .25 points, which will bump up mortgage interest rates slightly, but that’s
not bad news at all. In fact, the Fed is raising rates to temper inflation and
slow growth since they see so many positive economic factors, like job numbers
and housing. Interest rate increases will be gradual and aren’t expected to
hamper buying since any increase will also mean the economy is healthier and
jobs and wages heading in the right direction. No matter what, interest rates
are still historically so low and the cost of buying is far less than renting
in most areas.
7. City living in large metropolitan markets has seen
its zenith
The cost of living, housing,
and real estate in some large cities like Boston, New York, San Francisco, San
Jose, Seattle, etc. have become prohibitive, driving some out of the cities or
in search of suburbs or “second cities” that are still affordable. While urban
living is still attractive to many Millenials and other young couples, as they
age, they’re expected to head out to the suburbs. There, they’ll find lower
housing prices, better values, and a better place to raise families. At present
time, 37 percent of Millenials prefer living in the city versus 29 percent who
prefer suburban living, but that number has shrunk, and faced with the choice
of either staying an urbanite or being able to buy a house and move to the next
stage of their life in the suburbs, the number of those 80 million Millenials
who make the latter choice will be significant.
8. Location, location, bike trails and walking?
The suburbs may see a new
influx of migration, but today’s young buyers will be looking for different
amenities than their parents and grandparents did. Millenials, young buyers,
and new suburbanites would love to recreate some of the access, convenience,
and culture of city living, but in their own quieter neighborhoods. That means
parks, bike trails, neighborhood markets, cafes, and restaurants, and easy
access to trains and light rail for commuting without driving. Builders are
keeping this in mind, creating “pocket” communities within greater suburbs for
new homeowners to work, play, and raise their families without traveling far.
9. More loan products open the door for homeownership
Even as interest rates rise
slightly, lending will be healthy in 2016, invigorated from a diverse new set
of mortgage loans introduced into the market that will grant access to new
homebuyers. As many Americans can now afford the monthly payment for a home but
can’t scrape together the sizable 20% down payment traditionally needed to buy,
there will be an array of purchase loans with less money down. In fact, Fannie
Mae now has a loan that allows for multigenerational families to spread the
cost of homeownership by counting income of boarders or renters and other
family members. Likewise, Fannie Mae FNMA and Freddie Mac beginning to purchase
loans with only 3% down payments, or 97% loan-to-value products, which is
expected to greatly boost access to those loans, as now only about 11% of the
mortgage market is comprised of loans with down payments of 3% or less. In all,
the Mortgage Bankers Association predicts that new mortgage originations will
rise to $905 billion in 2016, up from $821 billion in 2015, an encouraging
sign.
10. The West will still be the best
In 2016, we’ll continue the
trend set in 2015 of the largest gains in home prices concentrated in the
western part of the country. From Denver to San Francisco, Austin to San Jose,
Salt Lake City to Seattle, and many points in between, year-over-year gains
were up to or exceeding 10% in major western cities in 2015. While those
numbers may adjust back down to earth a little in 2016, analysts still expect
the best gains for equity in the left half of the country.
So what’s our prediction for Sacramento?
Based on all of these ten
factors we laid out and the economic climate of the greater Sacramento region,
we predict that single-family home sales will increase by about 6-7 percent in
2016 over this year, and the median home sale price will increase by 7-10
percent.
