Real Estate Trends in 2016


Now that we are firmly into the New Year, we can start to report and forecast some trends in real estate that will affect both buyers and sellers.

Home prices will continue to rise modestly. Economists and housing experts surveyed by Zillow expect home values to grow an average of 3.5 percent with most markets experiencing modest gains. That’s closer to historical averages and more sustainable than double-digit increases.

Rising interest rates. Rates on adjustable-rate mortgages are reacting to the Fed hike. The rate on the 30-year fixed mortgage will increase slower, because it follows the yield on the 10-year Treasury, rather than the fed rate.

Rates on a 30-year mortgage currently stand at about 4 percent, up from record lows but still favorable. The Mortgage Bankers Association expects rates to reach 4.5 percent in 2016.

Credit is getting a little looser. The average FICO score on all closed loans in the third quarter was 723, the lowest level in at least four years, according to Ellie Mae. Two years ago, the average score for denied applications was 729.

Banks may be more willing to work with homebuyers over the next year as the volume of refinances falls as interest rates rise. The competition for borrowers may result in more flexibility in credit standards and underwriting.

It will still be cheaper to buy than rent Rental rates have risen even faster than home prices in some markets. Buying a home is 36 percent cheaper than renting nationwide for Millennials and now is the best time to buy since 2012, according to Trulia. Buying is cheaper than renting in every one of the country’s 100 largest metro areas. This disparity will likely grow as rents are expected to increase by 8 percent next year.

The suburbs will make a comeback. As Millennials start families and Boomers seek quieter surroundings, suburbs are becoming a desirable destination for potential buyers. The most attractive qualities in a suburban area are walkable Main Streets, job opportunities, and public transportation.

Buyers will want green and smart homes. Affluent Baby Boomers and younger buyers are increasingly seeking homes that incorporate eco-friendly features. This includes energy efficiency, a healthier indoor environment, and longevity.

For sellers, things as small as smart thermostats and lights that can be controlled by smartphones are great ways to differentiate their properties from similar listings.

Videos will be the new photos. While high-quality, professional photographs are the norm for online listings, it isn’t enough to make your listing stand out from the competition. More sellers are working with their real estate agents to create virtual tours and videos to highlight their properties.

New homes will come back big time. New home construction was one of the hardest-hit industries after the housing bubble bust. At their lowest point in 2009, developers had scaled back production by nearly 79 percent. Construction is ramping up again. New home sales grew 15 percent last year and are forecast to rise to 26 percent in 2016, according to the National Association of Home Builders.

Thinking of selling a home this spring?

Tune in next week for must-do fixes to prepare your home.


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