It’s that time of the year again where the experts dust off the Boston North Shore real estate crystal ball and look into the future. Whether you’re buying, selling or renting the real estate market affects you in one way or another. Here are a few predictions for 2016.
Boston North Shore Real Estate: 4 Expectations for 2016
Home price appreciation may level off. Now that the Federal Reserve has decided to raise interest rates slightly, analysts expect home prices to stagnate. Home affordability will become a bigger hurdle in 2016, especially with recent increases in home values. If prices rise and rates continue to go up, there could be a big increase in the number of unaffordable homes.
An improving U.S. economy may be offset by rising home prices and a lack of credit. Those factors will most likely limit Boston North Shore real estate demand and housing growth. The exception will be in markets where rents have skyrocketed, making buying more attractive. Higher rents typically spur home buying. However, when rents are rising it’s usually more difficult for first-time buyers to save money for a down payment and loan closing costs.
A larger number of millennials are expected to buy. According to trulia.com, more millennials say they want to become homeowners between now and 2018. Typically, millennials wait for a job change or promotion or when they’ve saved enough money to buy. While real estate experts don’t expect a huge surge of new buyers, they are confident there will be a gradual increase in 2016.
There could be fewer houses on the market. Most experts say the gradual recovery in home prices over the past few years has been both good and bad for people looking to buy for the first time or move into a larger home. This is due, in part, to the Baby Boomers who are slowly retiring and aren’t selling their homes as fast as they once did. As one economist said, “People aren’t going to trade in their low mortgage rate for a higher one.” Instead, Baby Boomers are remodeling rather than buying a larger home with a bigger mortgage and a higher interest rate. In fact, the American Institute of Architects (AIA) predicts home improvement projects will reach a record high in 2016.
Additional new mortgage loan options are needed. With rising interest rates come the need for new loan products with lower down payments. The growth in credit availability has been in the consumer lending arena, not in the mortgage loan industry. Borrowers have been more successful in using their improved credit scores to buy cars and boats, not homes.
New loan originations are expected to rise in 2016 by more than 10% to $905 billion, according to the Mortgage Bankers Association. Still, experts say additional creative mortgage products are needed to make home buying and borrowing more affordable.
Keep up with Boston North Shore real estate trends as we move through 2016 by checking out articles we post in the Boston North Shore Real Estate Categories to your right. We also post daily tips at Twitter and Facebook.