CoreLogic recently released the results of its 2016 Outlook for Housing, predicting another year of growth for the U.S. housing market. In this article, Brena Swanson of HousingWire.com highlights some of the details of the report.
“As we approach the start of 2016, the consensus view among economists is that economic growth will continue, and the U.S. will enter an eighth consecutive year of expansion in the second half of next year. Most forecasts place growth at 2 and 3 percent during 2016, creating enough jobs to exert downward pressure on the national unemployment rate,” said Frank Nothaft, senior vice president and chief economist at CoreLogic.
Nothaft predicts that housing can expect to see these five features next year:
Interest rates will increase. Homeowners who have adjustable-rate mortgages or home-equity loans will most likely see a rise in their interest rate because the Federal Reserve is expected to raise short-term interest rates approximately one percentage point between now and the end of 2016. Fixed-rate mortgages will also rise, perhaps up one-half of a percentage point between now and the end of 2016, reaching 4.5% for 30-year loans. Despite this increase in interest rates, mortgage rates will remain historically low.
Household formations will significantly add to housing demand. More than 1.25 million new households will be formed in 2016 due to improvements in the labor market and lower unemployment rates. These new household formations will increase housing demand, specifically in the rental market.
Home sales and home prices will likely increase. Overall purchase demand may lift 2016 home sales to the best year since 2007. Nationally, home prices will likely rise at a quicker rate than inflation, but not at the same rate as last year. The CoreLogic Home Price Index showed a year-over-year increase of 6% in the last 12 months; however, 2016 is only expected to see increases of 4%-5%. This increase in home sales and home prices can be attributed to the improved economy, which has enhanced homeowners’ feelings of financial security.
