Freddie Mac’s recently released December Insight & Outlook takes a look at how far the housing market’s recovery has come and where it may be headed as we enter 2016. According to the report, the economy has largely rebounded from the financial crisis. With unemployment declining, consistent economic growth, and a strengthening housing market, residential real estate and the economy have come a long way and the outlook is mostly positive heading into next year. But the report cautions that those same economic gains could also begin to pose a problem for potential home buyers, as rising mortgage rates and increasing home prices lead to declining affordability conditions. So what should buyers expect in 2016? Freddie Mac believes that a strong job market combined with pent-up demand will overcome the challenges of decreasing affordability. In fact, their outlook calls for a 3 percent increase in home sales over 2015’s total – which is on pace to be the best since 2007. They also believe that – though mortgage rates will begin to rise – they will remain historically low. Additionally, home price increases will begin to moderate, as new home construction rises and buyer demand falls. Overall, Freddie Mac expects the strength of the economy will help alleviate home buyers’ affordability concerns and that 2015’s momentum should carry into the coming year. More here.
Archive for December 2015
According to a new analysis from RealtyTrac, 2016 may be a good year for renters to buy a house. That’s because the cost of renting continues to rise and – even though home prices have also been moving higher – buying is still cheaper than renting in nearly 60 percent of housing markets across the country. Daren Blomquist, RealtyTrac’s vice president, says now may be the time to buy for renters who are looking to make a move. “Renters in 2016 will be caught between a bit of a rock and a hard place, with rents becoming less affordable as they rise faster than wages, but home prices rising even faster than rents,” Blomquist said. “In markets where home prices are still relatively affordable, 2016 may be a good time for some renters to take the plunge into homeownership before rising prices and possibly rising interest rates make it increasingly tougher to afford to buy a home.” RealtyTrac’s analysis looked at rental data from the U.S. Department of Housing and Urban Development, wage data from the Bureau of Labor Statistics, and sales deed data in 504 counties with a population of at least 100,000. More here.
The number of homeowners between the ages of 25 and 34 has been falling since long before the recent housing crash and recession. Then, during the crash, the number of young American homeowners dropped by more than 300,000 each year before leveling off in 2014. The reasons for the dwindling number of young American homeowners range from shifting demographics to recent volatility in the job market. But, according to an article from Patrick Simmons of Fannie Mae’s Economic and Strategic Research Group, the long decline may be nearing an end. “Given that the young-adult population is expected to expand robustly during the second half of the decade, it would take only modest further improvements in homeownership rate trends for the number of young homeowners to return to growth,” Simmons says. Though it’s difficult to say with any certainty, Simmons believes a combination of continued job and income growth, demographics, and a strong desire to own a home could lead to an increasing number of young adults buying homes in the coming years. After many years of decline, a growing number of first-time buyers would greatly impact, not only the housing market, but the broader economy as well. More here.
Fannie Mae’s quarterly Mortgage Lender Sentiment Survey polls mortgage professionals to get an idea of how they see the current market and the months ahead. Recently released, their fourth-quarter survey finds lenders reporting that credit standards continue to ease – which is good news for potential home buyers looking to purchase a house in the coming months. Doug Duncan, Fannie Mae’s senior vice president and chief economist, says increased credit availability should help home buyers affected by decreasing affordability conditions. “Several factors point to constrained housing affordability in 2016, particularly for first-time home buyers, including slow single-family supply response and limited inventory of starter homes on the market, strong inflation-adjusted house price appreciation outpacing household income growth, and an upward bias in mortgage rates. However, on net, lenders told us in our fourth-quarter Mortgage Lender Sentiment Survey that they have eased and expect to continue to ease credit standards, which was a consistent trend throughout 2015,” Duncan said. “Thoughtful easing will help mitigate some of the affordability decline moving into 2016.” The percentage of lenders reporting easing expectations reached a new survey high, according to the survey’s results. More here.