Break out the crystal balls. Three new real estate market forecasts for 2016 were published over the last week or so, offering insight into what we might see from the housing market next year. Forecasts were provided by CoreLogic, BofA Merrill Lynch Global Research, and the economic team at Trulia. Here’s a summary of their 2016 real estate market forecasts and expectations.
BofA Merrill Lynch: Real Estate Recovery Continues in 2016
BofA Merrill Lynch Global Research recently published its outlook for the U.S. housing market and the broader economy. Among other things, they expect the ongoing housing recovery to continue into next year. They also said the market would expand in 2016, with housing starts (which mark the beginning of new home construction) reaching 1.275 million over the course of the year.
The economic research group also gave a real estate market forecast for sales activity. Existing home sales, they said, could increase by as much as 5% in 2016. This is good news for anyone planning to sell a home in 2016, as it suggests a higher level of demand.
The group’s forecast also pointed to a possible slowdown in home-price appreciation in 2016. They expect house values nationwide to rise by a mere 1% next year, due to “home price overvaluation relative to income.” (Editor’s note: This is primarily a national forecast that doesn’t drill down to local markets. Prices in some local real estate markets, like Dallas and Denver, could rise by 5% or more in 2016. Bear that in mind.)
Lastly, the BofA Merrill real estate forecast for 2016 hints at a future rise in mortgage rates. This comes as no surprise really. Most housing analysts and economists expect the Federal Reserve to announce a rate hike later this month at their next scheduled meeting. But, according to the authors of this particular report, the Fed’s “go-slow approach should prevent a painful rise in mortgage rates.”
CoreLogic Market Forecast: Higher Demand and Home Sales
CoreLogic, a Southern California-based financial information company with a widely cited Home Price Index (HBI), recently offered its real estate market forecast for 2016. Like other analysts and forecasters, the company expects home sales and prices to rise next year, as demand for housing continues to grow.
According to the report, entitled Peering into 2016: The Outlook for Housing, the “improved macroeconomy has brightened the financial outlook for many families and enhanced their sense of financial security.”
Home buying activity could lift home sales in 2016 to a level not seen since 2007 (before the housing market collapsed). They also expect prices to rise faster than inflation next year, though more slowly than last year.
This echoes many of the other real estate market forecasts for 2016. The general consensus is that strong demand will push prices up in 2016, but at a more moderate pace than 2015. In other words, we could see additional but smaller home-price gains next year.
Trulia: Top 10 Markets to Watch Next Year
Last week, Trulia threw its hat into the forecasting ring by offering a short list of predictions for 2016.
They expect the formerly hot housing markets located in the West and Northeast to cool down next year. Markets in the South and Midwest (which the company refers to as the “Bargain Belt”) could experience an uptick in home sales activity. So in this regard, their 2016 real estate market forecast varies by region.
While we are seeing an upsurge in renting versus buying, Trulia’s economic team says buying is still the better deal across most of the county. In some California housing markets, however, renting might be cheaper than buying due to high — and still rising — home prices.
Lastly, Trulia offered a list of 10 “markets to watch in 2016.” These are areas with a healthy combination of housing affordability, job gains, and demand (based on online search activity).
Trulia’s top 10 markets to watch in 2016 include:
- Grand Rapids-Wyoming, MI
- Charleston, SC
- Austin, TX
- Baton Rouge, LA
- San Antonio, TX
- Colorado Springs, CO
- Columbia, SC
- Riverside-San Bernardino, CA
- Las Vegas, NV
- Tacoma, WA
So there you have them, another round of real estate market forecasts for 2016. This is actually a small sampling of the dozens of forecasts our staff has pored over in recent weeks. While there are points of disagreement, the general consensus at the national level is that 2016 will be another good year for housing (albeit with smaller price gains).