National Real Estate Market Economic Outlook Improving
The National Real Estate Market definitely looks ready to take off in 2016, in spite of existing-home sales in many areas dropping last November. Here's why.
Improved weather in several areas of the country resulted in a rise in single-family and multifamily home construction. Also, the number of millennial (those born between 1980-2000) first time homebuyers is anticipated to grow in 2016. This could indicate an increase in demand for more homes which would definitely assist the housing market leading to positive gains. With unemployment numbers improving, orders for brand new durables increasing by three percent, inflation not changing, and incomes starting to grow, the Federal Reserve decided it was the right time to increase interest rates, although in a very small amount – .25%. Even such a small incrase, though does indicate that our economy seems to be improving. And, of course, sales often drop in the holiday months. So many are hopeful that with the economy looking stronger, home sellers can look forward to eager home buyers in this lovely new year of 2016.
Current Homeowners Across the U.S.
According to the Mortgage Bankers Association weekly survey, the Refinance Index increased 11% compared to the previous week. Therefore it seems homeowners have anticipated the Federal Reserve's increase in mortgage interest rates. If you are a homeowner with an adjustable-rate mortgage or a variable home equity line of credit, you should expect your interest rates to rise in 2016. The first part of 2016 should be a good time to refinance. Home equity lines of credit (HELOC) are both variable and fixed. Variable HELOCs are tied to the Federal Reserve prime rate while fixed HELOCs are not. By refinancing in early 2016, you should be prepared to afford any major life events that will occur such as a daughter's wedding, high college tuition, or a home renovation.
Millennial Home Buyers Entering Real Estate Market
First time home buyers only had a 30% share in the November demand for homes, slightly down from 31% in October as well as last year. But in 2016, we are seeing an increase of first time homebuyers entering the national real estate market. This is due to more millennials getting older – 25-34 years old. The United States Census Bureau’s projections show that the population of millennials between the ages of 25-34 will increase by about 500,000 each year in the second part of the decade. In addition to that, the National Association of REALTORS’ quarterly survey, “Housing Opportunities and Market Experience ” reported that a large majority of those millennials who are currently renting desire to own a home in the future.
Mortgage Lenders & Home Buyers In 2016
Fannie Mae's 4th quarter Mortgage Lender Sentiment Survey™ shows that lenders expect to ease mortgage credit standards for GSE-eligible loans and government loans over the next 3 months. This should help reduce the affordability issues for first time homebuyers, helping young adults with their goal of home ownership. Although home prices will be high, this is great news for home sellers since they should expect an increase in demand for their house.
In 2016, the first-time home buyer will mortgage credit choices offered that weren't offered throughout the housing down-turn. First-time buyers should have low-and no-down-payment mortgage loans offered to them. Some loan choices offered include FHA loans and also the conventional 97% program offered by Fannie Mae. Then, qualifying first-time home buyers should only have to put down 3% on their new home.
Interest Rates Have a Big Impact on the National Real Estate Market
As you have no doubt heard, this past December 2015, the Federal Reserve raised short-term interest rates. Freddie Mac announced that the normal commitment rate for a conventional, 30-year, fixed-rate mortgage stayed under four percent. However it did rise from 3.80% to 3.94% in November 2015. Most experts believe that mortgage rates will rise to 4.50 % by the end of this year. Still, even at those rates, the interest rate continues to be at a historical low. 4.50% is a full percentage point below the interest rate during the 2008 recession. This low fixed rate for mortgages should help spurn demand and encourage many first-time home buyers to enter the real estate market. Still and all, prospective home buyers should keep an eye out for interest rate increases so as not to be caught by surprise once the spring buying season arrives. In fact, early 2016 would be a good time for home buyers to start house hunting.
National Real Estate Market Wrap-up
Yes! The National Real Estate Market looks to be on its way to expanding. The Federal Reserve raising interest rates indicates optimism in the housing market and also the economy as a whole. It looks like the 2016 housing market will stay a sellers market that should see a rise in first-time home buyers entering the real estate market thanks to the strong desire of homeownership by millennials 25-34 years old as well as the easing of credit standards and increases in wages. Homeowners with variable mortgage rates should expect their interest rates to rise in 2016, however early 2016 has been proving to be a good time to refinance so you won’t feel the brunt of further interest rate increases.
P.S. Curious about the real estate market trends are doing specific to our area of Sacramento and Roseville CA? Just click here. I know I was quite pleased to see that our greater Sacramento area sales only dropped in November. I know many of the REALTORS in my office, myself included, were thrilled to see it go right back up in December, with sales transaction going on along with caroling throughout the busy month. 🙂
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