What to Expect in Housing Market for the Rest of 2016

13 Jul What to Expect in Housing Market for the Rest of 2016

Based on current trends, here’s how we see the rest of 2016 shaping up:

Inventory Will Be Low

Home prices are rising and economists would normally expect to see inventory stimulated when prices rise. However, that isn’t the case in the current market. Mortgage rates are low and buying a home continues to be a cheaper than renting, but inventory remains inadequate.

Mortgage Rates Will Be Lower

Mortgage rates have been on a low streak recently, but they may fall even lower.  Fitch Ratings forecasts that rates in the U.S. will reach record lows following the United Kingdom’s vote to leave the European Union. Brexit lowered even further the Treasury rates that inform a the standard for mortgage rates.  Low rates could mean good news for sellers by increasing demand for homes.

New Construction Will Stay Slow

New construction was slow at the beginning of 2016 and continues to be slow. In May of this year, houses were built at a rate of 1.138 million groundbreakings per year, while the rate needed to keep up with demand is 1.5 million groundbreakings per year.

In addition, Many of the homes built in the last 5 years have been luxury properties, making the problem even worse.

Millennials Will Keep Renting

Millennials are poised to buy just as many homes as their predecessors, but most experts think that it’s the lack of inventory that slowing millennials from buying homes. If more affordable homes become available on the market, we can probably expect that millenials will start buying and stop renting.

People Won’t Move Much

Sales of existing homes is low and will remain low. Part of the problem may be that as house prices have risen over the last 5 years, the “next step up” is further away for homeowners. It’s becoming easier and easier to sell your home, but increasingly difficult to find a place to move into.  However, U.S. job growth and wages have a steady overall pace, which may help to close this gap.

Quick Sales Close to Asking Price

According to Redfin, the average time of sale is currently about 42 days, an all-time low since they started looking at this data in 2009.  This trend should continue and show even shorter sale times for the rest of the year. Because demand for homes is so high, asking price is getting closer to actual price when it comes to homes. The faster the market is in your area, the faster the sale process will  likely be.