The Mortgage Bankers Association (MBA) recently published a forecast for mortgage originations in 2016. The industry group expects home purchase loans to rise 10% in 2016 compared to 2015. Refinancing activity, on the other hand, is expected to decline by one-third next year.
According to Michael Fratantoni, MBA’s Chief Economist:
“We are projecting that home purchase originations will increase in 2016 as the US housing market continues on its path towards more typical levels of turnover based on steadily rising demand and improvements in the supply of homes for sale and under construction.”
This is the latest in a string of forecasts and predictions that suggest 2016 could be a strong year for the housing industry. Demand for housing is expected to remain strong in 2016 and could even rise in many markets across the U.S. This in turn could lead to additional home-price gains. New home construction is expected to rise next year as well.
4 Factors That Could Boost Home Purchases in 2016
The general consensus among housing analysts is that more people will buy houses in 2016 than this year. But why? There are actually several factors that could contribute to a rise in home purchases next year:
1. Consumer Confidence
We are several years into the housing recovery now, and consumer confidence is slowly rising as a result. A number of surveys and polls have shown that Americans are generally feeling more positive about the housing market, compared to previous years.
Granted, the housing crisis is still visible in the rear-view mirror. But things have been looking up in more recent years, and this could translate into stronger demand and higher prices in 2016.
2. Low Mortgage Rates
Mortgage rates have been hovering below 4% for months, and they might stay in this range for the foreseeable future. With that being said, the Federal Reserve is expected to raise the short-term federal funds rate in December 2015 or early next year, and this could lead to a rise in mortgage rates as well.
Translation: Thirty-year mortgage rates are currently below 4% (on average), but they might not stay that low. The looming threat of a rate hike has created a sense of urgency among prospective buyers, which in turn could boost home purchases in 2016.
3. The Threat of Rising Prices
Home prices have risen steadily over the last couple of years, according to several sources. The latest S&P/Case-Shiller Home Price Index, published on October 27, showed that house values in the U.S. “continued their rise across the country over the last 12 months.”
Looking forward, prices are expected to continue rising in 2016, albeit at a more modest pace. The economists at Zillow recently predicted that house values nationwide would rise by an additional 2.4% over the next 12 months or so (November 2015 – November 2016).
Like the threat of rising mortgage rates, this too creates a sense of urgency among buyers. In short, people who purchase sooner rather than later could save money by avoiding rate and price increases. This could contribute to a rise in home purchases in 2016.
4. More Jobs to Go Around
The nation’s unemployment rate has fallen steadily since peaking at 10% during the recession. In fact, the jobless rate fell to 5% in October 2015 — half what it was back in 2009.
The country gained another 271,000 jobs in October, according to the U.S. Department of Labor. “This is the best jobs report of this year,” said Andrew Chamberlain, chief economist at Glassdoor. This puts more people in a position to buy a home, which boosts housing demand and home prices.
Disclaimer: This story contains forward-looking statements (forecasts, predictions) regarding home purchases in 2016. Such statements are the equivalent of an educated guess and should not be considered factual. The publishers of this website make no claims regarding purchase activity in 2016 or other future real estate trends.