According to Freddie Mac’s chief economist, mortgage interest rates should remain at historically low levels in 2016 regardless of the Federal Reserve’s decision to raise the federal funds rate (for the first time since 2006) late last year. What does that mean for you? Whether you’re ready to buy or sell a home, now could be the time to act. But before you do, consider how the three biggest homebuying trends may affect you.
Housing inventory is likely to increase.
The Home Price Index, produced by CoreLogic, has increased 6 percent in the last year. The real estate experts predict home values will continue to go up at least 5 percent more by the end of 2016. This continued increase may encourage some homeowners who have been on the fence to decide it’s time to sell, expanding the inventory of available homes on the market.
However, that inventory may still not be enough to satisfy the number of Americans looking to buy—especially in areas with affordable property prices. If you’re planning to sell and have priced your home properly, it’s likely to go quickly. And if you’re planning to buy, you can expect plenty of competition.
Buying will remain more affordable than renting—in most of the country.
According to real estate experts at Trulia, buying was a better deal than renting in 98 of the 100 largest markets in the nation in 2015. Although interest rates are likely to rise slightly in 2016, they expect buying will continue to edge out renting. In fact, in many metro areas, interest rates will have to reach double digits before it will make more sense to rent than to buy a home. The caveat is California. If mortgage rates go up by 4.5 percent there, renting could become a better deal than buying in the Bay Area, Ventura County and San Diego.
Millennials buyers may become more plentiful.
For years now, real estate experts have waited with bated breath for the millennial generation to jump into the homebuying market with both feet. Unfortunately, it hasn’t happened—due at least in part to gargantuan student loan debt and continued unemployment. While it’s possible many younger adults will continue to put their purchasing plans on hold, some experts predict they’ll still account for at least a third of residential real estate transactions this year.
Contact us today for additional insight into these and other trends expected in your area this year. We’d love to share our expertise with you, whether you’re planning to buy or sell in 2016.