The housing market is considered by many experts as one of the most important catalysts of economic recovery. The fact of the matter simply is that everyone has a large stake in housing, whether as homeowners, apartment renters or taxpayers. Fortunately, for the first time in nearly an entire decade, the US market is beginning to enjoy rising interest rates. To better understand what the industry will be like in 2016, we’ve compiled a list of predictions and the relevant factors that are likely to affect them.
Homeowners will enjoy reliable gains in real estate prices
Since they hit rock bottom during the housing bubble several years ago, prices have steadily been on the rise. Year after year they’ve enjoyed single digit gains, and unless something extraordinary happens, 2016 should be no different. In fact, with just a little bit of luck, prices could climb to the heights they enjoyed prior to the unfortunate bubble burst.
“But what’s to stop the bubble from bursting now,” you may ask. Well, the main difference between now and then is that the prices today are firmly supported by owners’ incomes. Moreover, the public is no longer willing to take large risks with mortgages. Prior to the last bubble burst, homeowners were going mortgage crazy – taking out mortgages that they clearly couldn’t afford. Of course, it was only natural that these individuals would default on their loans, and thus, the resulting financial crisis happened.
But things are very different now. At the worst point of the previous bubble, almost 17 million individuals suffered from negative homeowner’s equity, which is technical jargon for “your home is worth less than your mortgage.” Fortunately, if the current trend continues, this number should be down to about 5 million by the end of the year.
Buying your first home should be easier
The Federal Housing Administration, which is the agency that assists first-time homebuyers, lowered its fees recently and some experts believe that they may continue to do so in the near future. Moreover, the government is actively working to lower the credit scores needed by potential buyers to qualify for their first mortgage. While these credit scores are still relatively high when viewed historically, the current trend shows that they are finally beginning to normalize.
Rent will continue to increase
Based on recent studies, rent will continue to rise in 2016. Most experts attribute this to the fact that the demand for rental homes is starting to outpace the existing supply. Vacancy rates are at an approximate 30-year low and many enterprising landlords are speeding up the construction of rental units. However, in most places, especially urban centers, the current demand is not likely to be met at least for the foreseeable future.