How the Real Estate Market Will Change in 2016

[Janos Sztojka]

How the Real Estate Market Will Change in 2016

1. High Rents Will Go Higher

A character known only as "Brandon S." made news recently when he decided to set up his permanent residence on the parking lot of his employer. In this case, his employer is none other than the search engine giant Google.

2. Mortgage Rates Will Go Higher

As of this writing, the current rate on a 30-year fixed mortgage stands at 4.05 percent. By the end of 2016, expect that number to go higher.

In 2015, we saw a great deal of volatility in mortgage rates. The average rate went up, but then it came back down again. You can expect those types of swings to continue.

3. Millennials Will Drive Sales, But Not as Much as in 2015

Millennials bought almost two million homes in 2015. They were the largest plurality of homebuyers at 32 percent. They were also by far the largest percentage of first-time homebuyers at 68 percent.

Expect that trend to continue this year as a housing industry hungry for sales develops homes for the Millennial market. Keep in mind also that college-educated Millennials, while not flush with cash, often enjoy a comfortable income. It's not uncommon for them to be able to afford mortgage payments on top of their college loan payments.

4. Gen-Xers Will Be There Too

Gen-Xers are often in the "financially recovering" category. That is, they've made some mistakes with their money or struggled during the Great Recession. In 2016, look for them to emerge as viable homebuyers.

5. It's a Good Year to Sell

Overall, expect real estate prices to jump 3 to 5 percent in 2016. That means it's going to be a very good year to sell.

Supply is still tight, which is advantageous to the seller. The buyer doesn't have a lot of choices and may have to settle on paying a little more than originally planned just to get into a great place.