2015 was arguably the best ONE yet for real estate professionals since 2007! As we head into 2016, the real estate industry continues to build on the previous year’s momentum. The economy continues to improve and a bigger demographic will be looking for homes this year, especially as we thaw out from winter.
The housing market goes through cycles, and we’re currently on the uptick of the housing cycle, having gained considerable growth from 2015. People who were hurt in the recession are finally able to buy and re-enter the market.
Millennials will be a driving force of home sales. In 2015, 32% of home buyers were Millennials, the biggest in industry. Improved financial conditions will enable young people to move out and start buying. This will leave the older baby boomers who are approaching retirement to downsize and relocate to smaller, more efficient homes. And according to Zillow’s marketing prediction, “The median age of first-time buyers will reach new highs in 2016 as millennials put off homeownership and other major life decisions” (Zillow 2).
Affordable housing has become a huge issue and many builders such as The NPR Group and Related California are working to produce affordable housing for the growing generation. Others like Lennar are working to fill a niche and create housing suited for multi-generational families.
Now for the bad news: Rent will continue to rise. The average rent was $962 which was up 1.15% from the previous year. Rent prices are accelerating at a more rapid pace than home prices, which does not bode well for the future home sales market. This might push a certain generation to buy homes, especially considering it is cheaper to own than to rent in more than 75% of the counties in the U.S. If rent prices continue to go up, it will make it more difficult for potential homeowners to save for a down payment which will have an effect on homeownership in the future. According to the New York Times, nearly half of all renters pay MORE than 30% of their income on rent. Now might be the time to weigh whether renting or buying would be more beneficial.
Considering buying? Reach out to a local RealtyONEGroup agent to help guide you through the process!