Even though existing-home sales declined last November, the biggest drop since 2013, theNational Real Estate Market favorable for buyers and sellers in 2016. Read on to see why.
- Warmer fall and winter weather conditions in the Northeast, Mid-Atlantic and other parts of the country lead to an increase in single-family home construction
- Millennials are expected to buy more homes in 2016, as rents increase and mortgage loan standards loosen.
- Many signs point to a stronger economy as well: unemployment is steadily decreasing, inflation has stayed level, and incomes are beginning to grow.
The Girls of Real Estate are confident that the combination of more homes, new buyers and a healthy economy points to increased demand and a stronger housing market in 2016.
SELLERS STILL HAVE THE UPPER HAND
The Girls of Real Estate aren't alarmed by November's existing-home sales stats. Lawrence Yun, the chief economist at the National Association of Realtors (NAR) believes slow existing-home sales in November resulted from a possible increase in closing timeframes that moved some transactions into December.
Properties stayed on market for 54 days in November - a 31 percent decrease from October. So, despite the slump in November sales, homes still sold at a quick rate. Also, although the 5.1 month supply of homes is up from 4.8 months in October, it’s still a seller’s market (a 6-month supply of homes is considered a balanced market). In fact, at this pace, the housing inventory could be sold by the time the White House Easter Egg Roll comes around.
HOMEBUYERS IN A HOME SELLER’S MARKET
Last month, the NAR released its first Housing Opportunities and Market Experience (HOME) survey. Their research showed that 83 percent of all renters desire future home ownership and Millennial renters want it even more.
Renters age 34 and younger most frequently say they aspire to be homeowners in the future (94 percent) - NAR HOME survey
What's holding them back? Affordability is their major concern. Here's the good news for buyers: Fannie Mae’s fourth quarter 2015 Mortgage Lender Sentiment Survey™ shows that lenders expect to ease mortgage credit standards for GSE-eligible loans and government loans over the next three months. Here's the good news for sellers: 2016's more attractive borrowing landscape should help renters convert to buyers as they seek mortgage credit options that were previously unavailable.
In December, for the first time since 2006, the Federal Reserve raised the federal funds rate from 0% to 0.25% to 0.25% to 0.50%. What does this mean to homeowners seeking to refinance? For homebuyers looking to originate? While not directly tied to mortgage rates, the fed funds rate affects them due to its impact on lenders' borrowing costs.
If it is more expensive for banks to borrow, they will pass that expense on to their customers," says Brett Sinnott, director of secondary marketing at CMG Mortgage Group in San Ramon, Calif. - Bankrate.com
The Girls of Real Estate believe that the recent fed funds rate increase (and others predicted for 2016) will not devastate the borrowing landscape. Unemployment is low, incomes are growing and in a January 14 Fannie Mae report their Chief Economist, Doug Duncan, noted that the fed funds rate hike has minimally impacted mortgage interest rates so far. He sees mortgage rates ending the year around 4.2 percent.
- Is 2016 the year you buy a home?
- Ready to sell in this strong market?
- Want to know more about local market conditions?
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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 remain a sellers market that should see an increase in home buyers driven in large part by the strong desire of homeownership by millennials 25 to 34 years of age, easing lender 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.