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Based on a study by Forbes Magazine, in 2016 and 2017, housing construction will increase and home prices will continue to rise. This is a result of more occupied housing which indicates a strengthening market in 2016.
Most economists agree that housing prices and sales will continue to grow in 2016, just at a slower pace. According to a recent report from RealtyTrac, for more than one-third of the nation’s major metro areas, home prices have reached all-time highs in 2015. As mortgage rates increase and home prices wane, sales will grow about half as fast as they did this year and prices will rise at a steadier pace – 3.5% to 4.5%, down from 6% in 2015.
It will be easier for more Americans to qualify for a mortgage in 2016. Lenders are taking steps to find new ways to measure creditworthiness such as evaluating credit scores based on a person’s rental history and utility bill payments. They will also include income from room rentals and family members. A bill was just introduced in the House of Representatives which would allow Freddie Mac and Freddie Mae to consider alternative credit-scoring models.
There will be more first-time home buyers. First-time home buyers will make up a larger part of the market than in 2016 due to the reasons mentioned above… slowing prices and easier ways to qualify for mortgages. This will give millennials the ability to purchase a home in 2016. Lynn Fisher, MBA’s Vice President of Research and Economics, said, “Improving employment markets will build on major demographic trends – including maturing of Baby Boomers, Hispanics and Millennials – to create strong growth in both owner and rental housing markets over the next decade.”
Slower markets mean slower closings. The market is expected to slow next year because government-backed loans will be more common and cash sales will decrease.
The biggest risk to the housing market in 2016 continues to be shortage of inventory. The number of homes for sale was down from 2014 to 2015 in 45 of the 60 metro tracked by Redfin. Inventory across all 60 metros is down 4 percent from a year ago. In the most recent pending home sale report from NAR, sales have plateaued due to a shortage of homes and fast rising prices in some markets.
New home construction and moderate gains in the existing home market will deliver the necessary one-two punch to push total home sales to the highest levels since 2006, according to the 2016 housing forecast issued this week by realtor.com . The forecast also identifies the top 10 markets for growth, as well as expectations for home prices and sales, interest rates and new home sales and starts.
2016 national housing outlook The 2016 housing market is expected to be a picture of moderate, but solid growth as acceleration in existing home sales and prices both slow to 3 percent year over year due to higher mortgage rates, continuing tight credit standards, and lower affordability. The new construction market will see more significant gains in the coming year as new home starts increase 12 percent year over year and new home sales grow 16 percent year over year. Total sales for existing and new homes will reach 6 million for the first time since 2006, a result of a strong gross domestic product increase of 2.5 percent and continued job creation. These healthy economic indicators will be tempered by lack of access to credit and rising home prices, which will ultimately limit housing demand and growth.
"Next year's moderate gains in existing prices and sales, versus the accelerated growth we've seen in previous years, indicate that we are entering a normal, but healthy housing market," says Jonathan Smoke, chief economist for realtor.com . "The improvements we've seen over the last few years have enabled a recovery in the existing home market, but we still need to make up ground in new construction, which we could begin to see in 2016. New home sales and starts will bring overall sales to levels we have not seen since 2006 and will help set the stage for a healthy new home market."
Who are the 2016 home buyers? Next year's standout year in total sales will be driven by three distinct segments of home buyers-older millennials (25-34 years old), younger gen X'ers (35-44 years old), and retirees (65-74 years old), according to Smoke.
Millennials: They are expected make up the largest demographic of home buyers in 2016, having represented 30 percent of the existing home market. Driven by increasing income, millennials will seek out homes that meet the needs of their growing families-putting the most weight on the safety of the neighborhood and the quality of the home. Commute time and a preference for older homes have these buyers looking in city-centers and closer-in suburbs. According to realtor.com 's proprietary research, the following markets are expected to be some of the most sought-out markets for millennial home buyers in 2016, due to their large numbers of millennials, strong employment growth, and relative affordability.
According to Freddie Mac's Primary Mortgage Market Survey, interest rates for U.S. home mortgages declined slightly or saw little change for the week ending Nov. 25
According to Freddie Mac's Primary Mortgage Market Survey, interest rates for U.S. home mortgages declined slightly or saw little change for the week ending Nov. 25....