Real Estate Trends That Will Shape 2016

It’s the new year. Get ready to break out the Crystal: We had a great 2015—the best year for housing since 2007. And our forecast here at realtor.com® projects an even better year in 2016.

How so? Well, with economic growth chugging along, employment will continue to increase, meaning that people will have more money coming in and they’ll be able to buy their first home or upgrade to a new one.

Here’s a closer look at the trends that will have the greatest impact on the housing market in 2016.

1. We’ll return to normal (Anyone remember normal?)

The year ahead will see healthy growth in home sales and prices, but at a slower pace than in 2015. This slowdown is not an indication of a problem—it’s just a return to normalcy. We’ve lived through 15 years of truly abnormal trends, and after working off the devastating effects of the housing bust, we’re finally seeing signs of more normal conditions. Distress sales will no longer be playing an out sized role, new construction is returning to more traditional levels, and prices rise at more normal rates consistent with a more balanced market.

2. Generational shuffle will make 2016 the best year to sell in the near future

Millennials emerged as a dominant force in 2015, representing almost 2 million sales, which is more than one-third of the total. This pattern will continue in 2016 as their large numbers combined with improving personal financial conditions will enable enough buyers between ages 25 and 34 to move the market—again. The majority of those buyers will be first-timers, but that will require other generations to also play larger roles.

Two other generations will also affect the market in 2016: financially recovering Gen Xers and older boomers thinking about or entering retirement. Since most of these people are already homeowners, they’ll play a double role, boosting the market as both sellers and buyers. Gen Xers are in their prime earning years and thus able to relocate to better neighborhoods for their families. Older boomers are approaching (or already in) retirement and seeking to downsize and lock in a lower cost of living. Together, these two generations will provide much of the suburban inventory that millennials desire to start their own families.

Assuming that most of these households will both sell and buy, it is important to recognize that 2016 is shaping up to be the best year in recent memory to sell. Supply remains very tight, so inventory is moving faster. Given the forecast that price appreciation will slow in 2016 to a more normal rate of growth, delaying will not produce substantially higher values, and will also see higher mortgage rates on any new purchase.

3. Builders will focus on more affordable price points

One aspect of housing that has not recovered yet has been single-family construction. Facing higher land costs, limited labor, and worries about depth of demand in the entry-level market, builders have shifted to producing more higher-priced housing units for a reliable pool of customers. That focus caused new-home prices to rise much faster than existing-home prices. Builders were able to be profitable and grow by following this move-up and luxury strategy, but their growth potential was limited by avoiding the entry level. That should begin to change in 2016.

We are already seeing a decline in new-home prices for new contracts signed this fall. In addition, credit access is improving enough to make the first-time buyer segment more attractive to builders. We’re looking for the strong growth in new-home sales and single-family construction as builders offer more affordable product in the year ahead. Consumers of all types should consider new homes, but availability will be highly dependent on location.

4. Higher mortgage rates will affect high-cost markets the most

We told you mortgage rates would go up in 2015, and they did—but they also went back down. We expect similar volatility in 2016, but the move by the Federal Reserve to guide interest rates higher should result in a more reliable upward trend in mortgage rates.

Thirty-year fixed rates will likely end 2016 about 60 basis points higher than they are today. That level of increase is manageable, as consumers will have multiple tactics to mitigate some of that increase. However, higher rates will drive monthly payments higher, and, along with that, debt-to-income ratios will also go higher. Markets with the highest prices will see that higher rates will result in fewer sales; however, across the U.S., the effect will be minimal as the move to higher rates will spur more existing homeowners to sell and buy before rates go even higher.

5. Already unaffordable rents will go up more than home prices

The housing crisis that politicians are ignoring is that the cost of rental housing has become crushing in most of the country. More than 85% of U.S. markets have rents that exceed 30% of the income of renting households. Furthermore, rents are accelerating at a more rapid pace than home prices, which are moderating. We’ve been seeing asking rents on vacant units increase at a double-digit pace in the second half of this year.

Because of this, it is more affordable to buy in more than three-quarters of the U.S. However, for the majority of renting households, buying is not a near-term option due to poor household credit scores, limited savings, and lack of documentable stable income of the kind necessary to qualify for a mortgage today.

This trend does not bode well for the health of the housing market in the future. It will only improve if we see more construction of affordable rental housing as well as more of a pathway for renters to become homeowners.
References: Jonathan Smoke, Realtor.com, Housing Trends eNewsletter

Donald Horne, Team Success Listing
Associate Broker-Coldwell Banker Shooltz Realty
Oxford Office   248-969-8065
Lapeer Office   810-338-0628
donaldhorne.realtor@gmail.com
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Home Buyer Rush? Mortgage Applications Surge!

Borrowers were undeterred by the highest interest rates in five months as mortgage applications for home purchases surged 12 percent in the latest week. Home purchase applications are now 19 percent higher than one year ago, the Mortgage Bankers Association reports.

“This was despite the fact that mortgage rates reached their highest level since July,” says Michael Fratantoni, chief economist for the MBA.

home buyer rushApplications for refinancings were also up for the week ending Nov. 13, with refinance applications rising 2 percent week-to-week. “What we are seeing is refinances increasing as we anticipate interest rates going up. It’s a great accelerator and motivator for many people,” says Jonathan Corr, CEO of Ellie Mae. “This month we saw the third consecutive month of refinance volume increases.”

Overall, MBA’s index measuring mortgage applications for refinancing and home purchases rose 6.2 percent on a seasonally adjusted basis last week.

MBA reports that the average rate on the 30-year fixed-rate mortgage was 4.18 percent last week, up from 4.12 percent the prior week.
References: Cnbc, RealtorMag, Daily Real Estate News

Donald Horne, Team Success Listing
Associate Broker-Coldwell Banker Shooltz Realty
Oxford Office   248-969-8065
Lapeer Office   810-338-0628
donaldhorne.realtor@gmail.com

Many Renters Can Afford To Buy A Home, They Just Don’t Realize It Yet …

Many Renters Can Afford To Buy A Home, They Just Don’t Realize It Yet …

Do I need a lot of cash to buy a home?  No, there are low cash required options available.

Won’t my monthly payment be more than I can afford?  There are loan choices that offer lower payments and qualifying for a mortgage is easier than ever.

Isn’t today’s housing market the wrong time to buy?  No, today’s housing market has made available many opportunities for first time buyers and interest rates are still low giving you more buying power.

What’s Your Average Rent?

Did you know that if you spend $825.00 a month in rent, after 3 years you have spent $29,700.00 in someone else’s property? After 10 years you have spent $99,000.00 paying off someone else’s mortgage!

Stop making your landlord rich, learn how easy it is to become a homeowner. Let us help you locate the financing, obtain the down payment and find you a new place to call home!

Donald Horne, Broker / Owner
Team Success Listing LLC
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Low Mortgage Rates in Oxford Michigan Are Lingering

This weeks mortgage article from RealtorMag, Low Mortgage Rates Are Lingering, discusses continued yearly lows…

The average percentage rates for fixed-rate mortgages inched up slightly this week, but continue to hover near yearly lows.

donald horne, realtorMortgage Rates’ Impact:

Freddie Mac reports the following national averages with mortgage rates for the week ending Sept. 11:

  • 30-year fixed-rate mortgages: averaged 4.12 percent, with an average 0.5 point, up slightly from last week’s 4.10 percent average. Last year at this time, 30-year fixed-rate mortgages averaged 4.57 percent.
  • 15-year fixed-rate mortgages: averaged 3.26 percent, with an average 0.5, rising from last week’s 3.24 percent average. A year ago, 15-year fixed-rate mortgages averaged 3.59 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 2.99 percent, with an average 0.5 point, rising from last week’s 2.97 percent average. Last year at this time, 5-year ARMs averaged 3.22 percent.
  • 1-year ARMs: averaged 2.45 percent, with an average 0.4 point, rising from last week’s 2.40 percent average. A year ago, 1-year ARMs averaged 2.67 percent.

Source: freddie mac

Donald Horne, Team Success Listing
Associate Broker for Coldwell Banker Shooltz Realty
810-338-0628  donaldhorne.realtor@gmail.com

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Mortgage Rates Sink to New Low in Metamora For 2014

New mortgage article in RealtorMag dated 08/22/2014, talks about fixed rate mortgages continue to tumble. Mortgage Rates Sink to New Low for 2014 is worth reading…

Despite predictions that mortgage rates were to inch up in the second half of this year, fixed-rate mortgages continue to tumble.

donald horne, realtorBorrowing costs moved lower this week, as the 30-year fixed-rate mortgage dipped to a 4.10 percent average, Freddie Mac reports in its weekly mortgage market survey. The 30-year fixed-rate mortgages previous low average for the year was 4.12 percent.

Forecasts: Right or Wrong?

Freddie Mac reports the following mortgage rate national averages for the week ending Aug. 21:

  • 30-year fixed-rate mortgages: averaged 4.10 percent, with an average 0.5 point, dropping from last week’s 4.12 percent. Last year at this time, 30-year rates averaged 4.58 percent.
  • 15-year fixed-rate mortgages: averaged 3.23 percent, with an average 0.6 point, dropping from last week’s 3.24 percent average. A year ago, 15-year rates averaged 3.60 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 2.95 percent, with an average 0.5 point, dropping from last week’s 2.97 percent average. Last year at this time, 5-year ARMs averaged 3.21 percent.
  • 1-year ARMs: averaged 2.38 percent, with an average 0.5 point, rising from last week’s 2.36 percent average. A year ago, 1-year ARMs averaged 2.67 percent.
  • Source: freddie mac, 

Donald Horne, Team Success Listing > video
Associate Broker for Coldwell Banker Shooltz Realty
810-338-0628 or donaldhorne.realtor@gmail.com

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Rates May Rise Sooner Than Expected

Interest rates may rise sooner than expected, according to the Federal Reserve this will hinge on the labor market, new article in the RealtorMag dated 07/16/2014 quoted Janet Yellen……

Federal Reserve Chairwoman Janet Yellen said that the Fed may need to raise interest rates sooner than expected, but it all will hinge on the labor market.

donald horne, realtor“If the labor market continues to improve more quickly than anticipated by the Federal Open Market Committee, resulting in faster convergence toward our dual objectives, then increases in the federal funds rate target likely would occur sooner and be more rapid than currently envisioned,” Yellen testified to the Senate Banking Committee on Tuesday. On the other hand, “if economic performance is disappointing, then the future path of interest rates likely would be more accommodative than currently anticipated.”

Interest Rates and Housing

Currently, the majority of Fed officials expect the central bank to begin raising interest rates about a year from now. The Fed’s benchmark short-term rate has stayed near zero since December 2008, which has helped to keep interest rates near historical lows.

Recently, the unemployment rate has fallen rapidly, reaching 6.1 percent in June. But wage growth has remained weak, Yellen noted.

Also, Yellen said, the housing market remains sluggish, which she said could slow the economic recovery.

“The housing sector has shown little recent progress,” Yellen testified to the Senate. “While this sector has recovered notably from its earlier trough, housing activity leveled off in the wake of last year’s increase in mortgage rates, and readings this year have, overall, continued to be disappointing. The recent flattening out in housing activity could prove more protracted than currently expected rather than resuming its earlier pace of recovery.”
source: realtor magazine, daily real estate news, housingwire, wall street journal

Donald Horne, Team Success Listing
Associate Broker for Coldwell Banker Shooltz Realty
1-810-338-0628 or donaldhorne.realtor@gmail.com