The rational real estate market is primed for expansion in 2016. Here’s why: Better weather in many parts of the country resulted in an increase in single-family and multi-family home construction. As the population of the millennial homebuyers grows in 2016, increased demand will help the housing market see positive gains. With unemployment steadily decreasing, orders for new durable goods increasing 3 percent, level inflation, and incomes beginning to creep up, the Fed decided to raise interest rates. The rate increase signals our economy is stronger. So, despite a dip in home sales at the end of 2015, home sellers can expect eager home buyers in 2016.
The New Millennial Home Buyers
In 2015, home sellers saw an increase of first-time home buyers enter the housing market because of the growing segment of millennials between 25 and 34 years of age. The Census Bureau projects that the population of millennials aged 25 to 34 will increase by an average of nearly 500,000 per year in the second part of this decade. National Association of Realtor’s inaugural quarterly Housing Opportunities and Market Experience survey discovered the vast majority of millennials between 25 and 34 years of age who currently rent have dreams to own a home in the future.
Those Pesky Interest Rates
The Federal Reserve raised short-term interest rates. Mortgage rates have stayed low, but are expected to rise to 4.50 percent by the end of 2016, still historically low. This is a full percentage point below the rate during the recession of 2008. The low fixed mortgage rate should help spur demand and encourage first-time home buyers to enter the market. But while the rate is at its current level. But you potential home buyers should keep an eagle eye out for rate increases so that they’re not caught by surprise when the spring buying season comes around. Right now is a good time for home buyers to purchase a home.
Between Mortgage Lenders and Home Buyers
The prediction from ‘the experts” is that in 2016, the first-time home buyer will have mortgage credit options available that were not available during the housing downturn. First-time home buyers will have low-and no-down-payment mortgage loans available to them. Some loan options available include FHA loans and the conventional 97 percent program offered by Fannie Mae. Qualifying first-time home buyers need only to put 3 percent down on a home.
Whoa, doggies! That is pretty affordable!
Happy Homeowners
According to the Mortgage Bankers Association’s weekly survey, the Refinance Index increased 11 percent compared to the previous week. So it appears homeowners have anticipated the Federal Reserve’s increase in interest rates. If you’re a homeowner with an adjustable-rate mortgage or a variable home equity line of credit, you should expect your rates to rise in 2016.
The first part of 2016 will be a good time to refinance. Call your local Realtor for a referral to a great lender. Home equity lines of credit (HELOC) are both fixed and variable. Variable HELOCs are tied to the Federal Reserve prime rate, fixed HELOCs are not. By refinancing early in 2016, you could any major life events that may occur such as daughter’s wedding (tell her to elope!), college tuition, or home renovation (My current fantasy is a steam shower).
The Final Wrap-up
It is believed the national real estate market is on its way to expanding. The Federal Reserve raising interest rates indicates optimism in the housing market and the economy as a whole. The 2016 housing market will probably remain a sellers’ market. We should see an increase in first-time home buyers entering the market because of the strong desire of homeownership by millennials 25 to 34 years of age, and easing credit standards and increases in wages. Homeowners with variable mortgage rates should expect their rates to rise in 2016, but early 2016 will be a good time to refinance so that you’re that you won’t fill the brunt of further interest rate increases.
On the local scene, as of Super Bowl Sunday (yes, some of us work then…) we had a mere 78 homes on the Multiple Listing Service (MLS), ranging from $25 million for an executive home on a large property with vineyards, row crops and walnuts to $240,000 for a 650 square foot home on a 1999 square foot. We have two homes in the 200Ks, seven in the 300s, 15 in the 400s, 12 in the 500s, 14 in the 600s, 12 in the 700s, four in the 800s, five in the 900s, and seven above $1 million.
If you are interested in finding out what your home might be worth, any real estate agent would love to do what is called a Comparative Market Analysis or a Home Evaluation (it’s called different things by different people) to give you a number. This service is free. You don’t have to try and use one of those anonymous websites…they are all owned by agents who are trying to get your info. Just call someone you know, or get a referral from someone you know. It’s not a big deal.
It’s a good life!
NANTS FOLEY is a Realtor and co-broker at Four Corners Real Estate Group in downtown Hollister. Comments or questions (or requests for a home evaluation) will reach her at nantsfoley@gmail.com, or 831-801-5110. www.nantsfoley.com.
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