Santa gets a good view of the neighborhood from his chimney-side vantage point, but do you know what the real estate and housing landscapes look like for 2016?
Fannie Mae’s Home Purchase Sentiment Index, a measure of current and future consumer perspective on home buying, reflects a dip of 2.4 points in November, according to a recent press release.
“The challenge of housing affordability coupled with tight supply may be preventing overall housing sentiment from gaining momentum as income growth isn’t keeping pace with the cost of housing,” says Fannie Mae.
Views on the “Good Time to Sell” measure slipped six points, although “Good Time to Buy” sentiment was the only measure on the uptick, growing one point.
Fannie Mae chief economist Doug Duncan says this year’s housing market stands to be the best since 2007. However, until incomes steadily grow, “consumers’ ability and willingness to purchase a home is likely to remain an issue…”
Discover what’s predicted for housing in 2016.
‘Our houses are such unwieldy property that we are often imprisoned rather than housed by them.’ --Henry David Thoreau
Financial institutions and consumers alike remain guarded after the economic crisis. Indeed, “Some Experts Think the Housing Bubble Is Back,” according to Zillow.
“It’s harrowing to imagine another housing bubble already, and the good news is that Zillow’s economists and most of the 66 experts who responded to questions about a bubble in the fourth quarter 2015 Zillow Home Price Expectations Survey…think no major U.S. markets face any significant risk of a bubble for the next five years.”
However, some feel New York and San Francisco may already be in a bubble. And ten experts believe Boston, Los Angeles and Miami will be in a bubble within three years—this sentiment largely depends on the definition of “bubble.”
If a bubble is a situation whereby housing prices reach "unsustainable levels given the economics of their local markets,” then the San Francisco area is suspect, and Seattle may be also.
“The question is not so much how overpriced they are, but why they’re overpriced,” notes David Wyss, former chief economist at Standard & Poor’s.
It may be that investment buyers are spending beyond a home’s worth.
Notes Wyss, “I worry that prices are getting above where the natural market would take them.”
Another factor resulting in price hikes is a lack of housing. In San Francisco, a bubble may exist due to “increasing unmet demand from well-compensated tech and oil workers.”
Lawrence Yun, chief economist at the National Association of Realtors (NAR), may concur in a recent blog post at NAR. “Contract signings in October made the most strides in the Northeast, which hasn’t seen much of the drastic price appreciate and supply constraints that are occurring in other parts of the country. In the most competitive metro areas—particularly those in the South and West—affordability concerns remain heightened as low inventory continues to drive up prices.”
Increasingly better job markets prompt growing demand to buy, now evidenced by increased existing-sales beyond a five million sales pace for eight months in a row.
NAR anticipates continued growth in existing sales for 2016, but limited inventory and affordability issues resulting from higher prices and increasing interest rates “will likely temper sales growth to around 3%.”
NAR believes prices of homes will moderate somewhat from 2015’s six percent hike to five percent in 2016.
‘Owning a home is a keystone of wealth—both financial affluence and emotional security.’ --Suze Orman
“Deteriorating house affordability will drive 2016 trends,” says Zillow. Consequently, first time home buyers will find themselves in the suburbs, and renters will have to wait longer to buy.
Further, rising rates will temper buying enthusiasm.
Zillow has five predictions for 2016’s housing market:
Discover “4 Real Estate Trends We’ll See in 2016,” per MarketWatch.
Here, analysis from various sources including RealtyTrac and the Federal Reserve indicate:
“The American Dream of homeownership is not only alive and well, but continues its resurgence,” notes Trulia in its “Housing in 2016” analysis. The number of those who would like to buy a home is up one percentage point to 75% over the prior year; and up 2% for millennials at 80%.
But, 22% of American consumers believe it will be more difficult to obtain a mortgage in 2016, perhaps a consequence of rising rates.
Of millennials who hope to buy, 31% want to do so by 2018. Good jobs and down payments will be important.
Other Trulia predictions:
Fifty-four percent of renters indicate saving for a down payment is the biggest hurdle to buying. Bad credit history is burdensome for 35%, and 31% have problems qualifying for a mortgage loan.
Twenty-seven percent struggle with rising prices, 29% cannot pay off other debt, and 23% have employment issues.
A final interesting analysis on the way people live is found in PwC’s Emerging Trends in Real Estate. Here, note other lifestyle variables exist for consumers in housing considerations.
“Economic and demographic factors are influencing the housing market as it deals with issues around providing the type of housing desired by the peak of the baby boom generation, aging millennials, a population making an urban/suburban choice, and finding a way to provide affordable housing to support a vibrant workforce.”
Some innovations addressing such concerns include micro-housing, cohousing, and community amenities.
Homeownership recedes from a pre-recession rate of 70% of households to 63.4% in Q2 2015.
“A reasonable expectation is for the homeownership rates to settle in a narrow range around its 50-year average of 65%. In the short run, that means the advantage remains with investors and developers in the rental housing sector.”
In the long-term, however, this means that housing demand should increase over all residential groups.
How do real estate and housing trends give you pause as you look toward 2016 from your unique vantage point?