Five Trends That Will Shape Brevard’s Housing Market for 2016
Looking back, 2015 was a great year for both the housing market and the economy at large. In fact, the real estate market was in its best shape since 2007.
Economic growth should continue with the employment forecast becoming more favorable throughout the country as the year progresses. With healthier employment figures, more potential buyers will have the funds to purchase their first home or purchase a better one in 2016.
Here’s an insider look at the 2016 real estate trends that will affect the Brevard County housing market.
Getting Back to Normal: The Housing Market Will Stabilize
In 2016, everything we are reading and seeing show home prices and sales growing at a slower pace than 2015, but will remain steady throughout the year. A slight slowdown in housing market trends does not necessarily indicate a problem, however. The market will just return to a more normal rate of growth.
Home sale trends in the past decade have been truly unpredictable. After coming out the other side of the recent housing bust, real estate sales figures are beginning to show signs of normalizing.
Normal levels of new construction are finally starting to be seen in markets across the country and there are no longer a large level of “distress” sales of existing properties. Between those two factors, home prices are beginning to rise at a more regular rate.
Mortgage Rates Will Rise: High-Cost Markets Hit the Worst
Mortgage rates in 2015 were particularly volatile, going up and then back down again towards the end of the year. In 2016, they are expected to remain unpredictable, but the Federal Reserve’s plan to drive interest rates upwards means they will likely continue to rise throughout the year. We saw this with the recent rate increase from the Fed at the end of 2015.
Higher mortgage rates mean higher monthly payments for consumers, causing debt-to-income ratios to take a hit. Markets with already high prices may see a decline in sales as a result. What this means in layman’s terms is, buyer’s affordability will erode. For example if a buyer was qualified up to $500k with a 4% rate, that same buyer can now only afford $450k with a 4.5% rate.
2016 Real Estate Trends Driven By Generational Shift
In 2015, Millennials purchased nearly one third of all homes sold. Improving employment and financial prospects for the 25-34 age group will ensure that this trend continues into 2016. Many of the Millennial generation are first time buyers, meaning they are looking for affordable new construction or existing structures that fit their price needs.
Gen Xers who are finally recovering financially after unstable employment prospects and falling wages will also impact the market in a big way. Fewer members of Gen X are first time buyers than Millennials, which means many will be selling homes in 2016 as well as purchasing different properties. In their prime earning years, Gen X buyers will be moving to more attractive neighborhoods and purchasing larger, more expensive properties than their Millennial counterparts.
The Baby Boomers will also help drive the real estate market in 2016. Many Boomers are reaching retirement age, which means they are looking to downsize to smaller, more affordable properties. Together, Boomers and Gen X sellers possess the majority of the attractive properties that Millennial buyers are searching for.
Most Gen X and Boomer households that are in the market for new real estate will be both selling and buying. 2016 will be a great year to sell a home because there is still a lack of options available for buyers. As a result, prices will remain at a relatively high level.
However, with housing market trends going back to normal levels, price appreciation will begin to slow in 2016. This means that now is a great time to sell and buy. Prices are not projected to appreciate and mortgage rates on new purchases can only increase from their 2015 levels.
Builders and Buyers Focused on Affordability for New Construction
One significant part of the housing market that still has not recovered is single-family construction. Rising costs in land, a limited labor pool and worries about demand have slowed the rate of affordable new construction being produced by building companies. In the past few years, builder focus has been on higher-priced units that net a better rate of profit. This has caused new construction prices to rise overall at a much higher rate than normal, but that should begin to change in 2016.
Access to credit is improving for first-time buyers making affordable new home construction appealing to builders once again in many markets. As with all real estate trends, availability will depend on the individual market, but 2016 will be a good year to buy a newly constructed home in many areas.
Unaffordable Rents Continue to Increase: Many Renters Still Can’t Afford to Buy
A staggering 85 percent of markets have rents over 30 percent of the average renter’s income and rental rates continue to rise. Because of this upward trend in rental costs, purchasing a home is more affordable than renting in the majority of U.S. markets. Unfortunately, many renters are still faced with unstable incomes, low credit scores and other barriers to becoming homeowners.
All of these factors have the potential to negative affect the market in coming years. The only way to improve these conditions are an increase in affordable construction for housing rentals and better pathways to home ownership.
Carpenter / Kessel market intelligence
Here at Carpenter / Kessel with Dale Sorensen Real Estate, we know the importance of staying on top of market trends, and we are well known for giving clients valuable, analytical insight into the current real estate environment. We understand and, more importantly, can succinctly explain to potential buyers the relative benefits of property ownership as well as the unique financial calculus that the market requires. We really understand real estate in Brevard County…Many agents or companies say that, but we have the numbers to prove it. With over 71 million dollars worth of real estate sold in 2015 and more waterfront transactions than any other agent or Team in S. Brevard County from 2009 – March 2015 (over 200 waterfront transactions) we are the market leaders. If you own or are buying a property in the area, why work with anyone else?
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