After a dramatic housing crash and a slow, painful recovery, 2015 marked the real estate sector’s best year in nearly a decade. The National Association of Realtors (NAR) points to 2016 as one of continued improvement, forecasting that existing home sales will expand “at a moderate pace,” and that pent up demand could put a dent in the “affordability pressures and meager economic growth” the trade group has been warning about in recent years.
Below, NAR Chief Economist, Dr. Lawrence Yun offers his view of what is in store for 2016:
A visual look at the 2016 housing forecast
Market factors to take into account
As mentioned in the video, Dr. Yun points to indicators other economists agree will impact housing in 2016: pent up demand, sustained job growth, and improving inventory conditions.
But it’s not all sunshine and rainbows, no, Dr. Yun warns that while sales will rise, increasing mortgage rates and an upturn in home prices could outpace wages. Further, global economic conditions could hold back sales in 2016 from achieving what they would otherwise. Just this month, China has dominated headlines in a way that even mainstream, non-cable-tv-watching Americans are fully aware of.
NAR will keep a close eye on these global factors this year that we all thought felt so far away in the past, as they influence our own markets.
“This year the housing market may only squeak out 1 to 3 percent growth in sales because of slower economic expansion and rising mortgage rates,” Yun said. “Furthermore, the continued rise in home prices will occur due to the fact that we will again encounter housing shortages in many markets because of the cumulative effect of homebuilders under producing for multiple years. Once the spring buying season begins, we’ll begin to feel that again.”
One month left to report
NAR soon releases the final month of data for 2015, which Dr. Yun expects to indicate existing home sales up 6.5 percent for the year. This would mark a pace of around 5.26 million, the highest level since 2006 before the historic housing crash. NAR is quick to point out, however, that 2015 does end the year with sales 25 percent below the prior peak set in 2005.
The national median existing-home price for all of 2015 is expected to close at $221,200, up around 6 percent from 2014.
In 2016, existing sales are expected to grow between 1 and 2 percent (5.30 to 5.40 million) and prices between 5 and 6 percent.