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5 Real Estate Trends to Expect in 2016

by James Bellandi

How will the 2016 housing market take shape?

2016-housing-market-realtor-com-inventory-millennials-construction

When all the statistics are tallied, 2015 will likely have been the best year for new home sales since 2007, which has raised expectations for 2016.

Realtor.com has highlighted five housing trends that agents should expect in the New Year:

1. ‘Normal’ will Return – With large amounts of luxury properties being built and marketed, there’s been concern about the lack of affordable housing; some have even feared the formation of a new housing bubble. However, the days of purely-luxury-focused developments may be waning, as realtor.com expects the market will return to more normal levels with slower growth in home sales and prices.

2. Millennial Homeownership to Trend Upwards – Millennials and their relative absence in the homebuying market have been a recurring point of concern. According to realtor.com, Millennials represented a third of homebuyers in 2015, and accounted for $2 billion in sales. That trend is expected to not just continue, but to strengthen, as a majority of Millennial first-time homebuyers are expected to enter the market this year.

3. Affordable Construction – Construction has been hampered by many factors, including labor shortages and high land costs. That has led to a strong focus on luxury developments, which offer builders strong returns…but also lead to a sharp increase in housing prices. Although affordable housing has been neglected, realtor.com projects a shift in focus towards more affordable construction, based on contracts signed in the fall along with an increased availability in credit access.

4. Higher Mortgage Rates – Mortgage rates will likely rise from the historic low thanks to the decision by the Federal Reserve to raise interest rates this past December. While higher rates will drive monthly payments higher, it could also encourage homeowners to sell, which would help alleviate the rampant inventory shortages that have plagued housing for years.

5. Rents will Continue to Rise – Rents have been surging upwards, and no end is in sight. While this has the upside of making homebuying more appealing, it also means that for the 43 million renters in the country, it will be that much harder for them to make a home purchase as they devote more and more of their earnings to cover their monthly rents.

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