Los Angeles, CA – October 10, 2015 – Fred Wehba reports that there are five key predictions for the American housing market for 2016. Home prices, he says, will likely rise at a slower rate across the majority of states. As more homes enter the market, Fred Wehba expects supply and demand will even out. Fortunately for home sellers, housing analysts believe that prices will continue to rise, albeit at a less accelerated pace.
According to Fred Wehba, the largest growth will likely continue to occur in the West. Large cities in California and Colorado have demonstrated gains of greater than 10% in 2015. Even with lower expected gains for 2016, Fred Wehba believes that these areas will continue to incur a higher cost of living than others. Fred Wehba predicts that a steady 4% gain will be observed by the rest of the nation.
In the latter part of 2015, interest rates sank well below 4%, reports Fred Wehba. The average has hovered at or about this number for the majority of the year. 2016 will likely see steadily increasing interest rates, and Fred Wehba says Freddie Mac predicts that interest rates may climb to over 5% by the last quarter of 2016. This may result in a slight reduction of residential market activity. However, Fred Wehba notes that a continually improving job market may largely counter this drop.
The job market, notes Fred Wehba, will more than likely continue to improve, bringing more home buyers to the market. 2016 is slated to add approximately 2 million additional positions to the workforce. This provides the opportunity for more people to purchase real estate. Fred Wehba believes that 2016 may open with an inflated demand. Areas where there is still a short supply of properties may see home prices continue to increase rapidly.
A final prediction by Fred Wehba is that millennials may forgo new home purchases. With high student loans, debt-to-income ratio may create hurdles for young adults in the market for a first home. These income ratios may fall outside of underwriting approval numbers. Fred Wehba notes that excessive debt is also responsible for lowering a borrower’s credit score, meaning he or she may not qualify for a favorable loan rate. Fred Wehba also notes that because of educational debt, many potential homebuyers may have missed payments on credit cards, which affects credit scores and further impacts their ability to buy.