Homebuyer's outlook in 2016
Posted on Monday, December 28, 2015 at 10:00:51 AM
This year was one of the best the U.S. housing market has seen in nearly a decade. With the start of 2016 just a few days away, potential homebuyers are curious what the market will look like in the new year.
"Mortgage interest rates are forecasted to rise in 2016. In fact, the general consensus is that they will rise 1/2 of 1 percent by the end of the year. That is a roughly $30 increase per month for every $100,000 of borrowed money," said Patrick Deady, Vice President of Home Loan Investment Bank. "In short, higher rates decrease overall affordability in the market and put downward pressure on demand."
But that's only part of the story.
"Despite these potential slowing factors to the housing market there are other more forceful factors at play that will likely propel the housing market forward in 2016," Deady continued. "The cost of rent is outpacing inflation. Renters should give serious consideration to buying given that rates remain historically low and rents are rising."
Rents have grown so high in the last year that, according to RealtyTrac, buying a home is more affordable than renting in 58 percent of U.S. markets nationwide. With renters committing a stunning 37 percent of their income to monthly payments - a figure that will only continue to rise in 2016 - obtaining residential financing to purchase a home has become the more attractive option.
What about millennials? They are now the biggest generation in the U.S., so what will their buying habits look like in 2016?
"Millennials, who thus far have shied away from homeownership, are still in a great position to take advantage of low rates and should give serious consideration to homeownership," said Deady. "The price of real estate is also outpacing inflation. Millennials might want to buy now or risk paying higher prices with even higher rates down the road."