Real Estate News & Commentary

The Investor’s Roundup of the Best 2016 Real Estate Market Forecasts

Expertise:
2 Articles Written
real-estate-market-forecast

The annual real estate market prediction season is coming to an end. Every year, December and January are filled with opinion pieces speculating what the US real estate market will look like in the new year.

Want more articles like this?

Create an account today to get BiggerPocket's best blog articles delivered to your inbox

Sign up for free

Here’s a roundup of the 2016 forecasts. It’s always nice to know what the conventional wisdom is, whether you agree with it — or especially when you don’t.

Corelogic

If the US has 2.3% economic growth, we will likely see:

  • Mortgage rates up 0.5%
  • Household formations exceed 1.25 million
  • Rental market remain “tight” — vacancy low, rents rise
  • Owner market: Sales up 5%, home prices up 4-5%
  • Originations: Less single-family, more multifamily

Source: Corelogic.

Zillow

  • Home values will grow but more slowly than in 2015
  • A Zillow survey of 100+ economic and housing experts said home values would increase 3.5% in 2016
  • Home value growth will outpace income growth
  • Rents will continue to rise and will set new records in 2016, especially for units targeting middle and lower income renters
  • Dense, walkable, amenity-rich suburbs with an urban feel will be 2016's new hotspots

Source: Zillow

multifamily-markets

Related: The Real Estate Market: How to Analyze and Predict Cycles

Redfin

  • Prices and sales will grow half as fast
  • Easier credit
  • More (and older) first-time buyers
  • Slower market, slowing closings
  • Continuing inventory shortage

Source: Redfin.

National Association of Realtors

  • Existing home prices will increase 4% to 5% in 2016. (2015 prices were up 6% from 2014.)
  • Existing home sales in 2016 will only increase 1%-3% above 2015 levels. (2015 sales were up 7% from 2014.)
  • The US will see weak economic growth in 2016 but will avoid a recession.
  • Thirty-year fixed mortgage rates may hit a 4.5% annual average in 2016. Note: 4.5% “annual average” suggests to me rates around 5% by the end of 2016.

Strong Cities in 2016

Cities that have seen strong job growth in 2015 will likely see strong home prices and sales in 2016.

  • Grand Rapids
  • Riverside
  • Salt Lake City
  • Atlanta
  • Charlotte
  • Portland
  • Tampa
  • Providence

real-estate-market-invest

Related: The 10 US Markets With the Biggest Rent Increases & Decreases in 2015

Weak States in 2016

States with a lot of energy job losses will likely see weak housing markets in 2016.

  • West Virginia
  • North Dakota
  • Louisiana
  • Oklahoma

Source: National Association of Realtors.

Consensus US Real Estate Market Forecast for 2016

  • Mortgage Rates: Increasing to 4.5% to 5.0% by the end of 2016
  • Home Prices: Up but less than the increase in 2015
  • Home Sales: Up but less than the increase in 2015
  • Rents: Up but less than the increase in 2015

Investors: What kinds of trends do YOU think we’ll see this year? What does your local market look like?

Let’s talk in the comments section below!

John is a real estate numbers geek. He's an economist who stumbled into becoming a real estate agent when people visiting his wannabe Zillow website (created 4 years before the real Zillow website!...
Read more
    Sandeep S. Investor from Cupertino, California
    Replied over 4 years ago
    Great compilation! It would be even more interesting to put the predictions that these same folks made in January 2015 and seeing how they fared!
    John Wake from Scottsdale, Arizona
    Replied over 4 years ago
    Sandeep S., That would be a good idea! Some did review their good and bad calls for 2015.
    Joseph Thomas Investor from Kansas City, Kansas
    Replied over 4 years ago
    John, thanks for taking the time to compile for everyone’s benefit. I sure appreciate the overview. All the best in 2016 to you.
    John Wake from Scottsdale, Arizona
    Replied over 4 years ago
    Thanks, Joseph! My pleasure.
    Douglas Skipworth Rental Property Investor from Memphis, TN
    Replied over 4 years ago
    I agree with the other comments above. Great job, John. Thanks so much for sharing.
    John Wake from Scottsdale, Arizona
    Replied over 4 years ago
    Thanks! I appreciate you taking the time to comment!
    Brock Adams from Chapin, South Carolina
    Replied over 4 years ago
    Great review. Real estate varies from state to state as we all know this is the reality
    John Wake from Scottsdale, Arizona
    Replied over 4 years ago
    Thanks, Brock!
    Matt M. from Branford, Connecticut
    Replied over 4 years ago
    Great overview. Would you also source where to find rent to value ratios for different markets? As a buy and hold investor, that would very helpful.
    John Wake from Scottsdale, Arizona
    Replied over 4 years ago
    Matt M., I know it’s crazy but I don’t follow rents closely. I focus on the home price appreciation side. However, BiggerPockets itself has an EXCELLENT index along those lines. https://www.biggerpockets.com/renewsblog/2015/10/14/biggerpockets-real-estate-investment-market-index-best-worst-markets-real-estate-investors/
    Ken
    Replied over 3 years ago
    Great article, John. In hindsight, how did the above predictions pan out against the actuals of 2016? I’m new to this and learning, but was hoping to find out from a veteran like yourself about the results looking back, in light of the predictions.