The Investor’s Roundup of the Best 2016 Real Estate Market Forecasts
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.
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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.
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
- 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
- Prices and sales will grow half as fast
- Easier credit
- More (and older) first-time buyers
- Slower market, slowing closings
- Continuing inventory shortage
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
- Salt Lake City
Weak States in 2016
States with a lot of energy job losses will likely see weak housing markets in 2016.
- West Virginia
- North Dakota
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!