Housing Predictions For 2016

Housing Predictions for 2016Housing predictions are easy to make. They’re a little harder to make accurately.

But, I’ll give that no never mind. It’s a new year and most of my clients are always asking me to make predictions about the future of the housing market.

  • When do you think housing prices will peak?
  • How much do you think housing prices will rise?
  • Can I sell my house quickly?

Those and lots, lots more.

Of course, there are some really smart people who make a living making predictions like this but, hey, I’ll give it a shot.

So, here are my predictions for 2016.

Home Prices

These affect both buyers and sellers but sellers seem the most interested in them. My guess is that they will continue to rise at a moderate pace. Something along the 3% to 5% range.  The days when your home’s price bumped up by 10% overnight are gone. Those “exotic” mortgage products that made prices like that possible are a thing of the past.

Luckily, for home owners, the housing inventory is still very thin. Than means that there are more buyers than sellers and the simple Law of Supply and Demand will cause home prices to continue to rise. I also happen to think the Millenial Generation is getting to the age that they’re starting to think about settling down, having a couple of kids and, generally, become adults. That’s a little bit of a stretch but they’re getting to be 30somethings now.

The economy is also beginning to recover pretty steadily. I happen to think that wage growth is not too far off plus the price of gasoline and low inflation help with people saving toward the purchase of a house.

Mortgage Interest Rates

Everyone gets freaked out about the Federal Reserve Rate. It really has nothing directly to do with mortgage rates. However, people get nervous and it does send a signal to the financial sector that things are looking up. That means that banks will begin to inch rates up as well. A quarter point here. A quarter point there. All the smart people think that mortgage interest rates may be as high as 4.75% by the end of 2016.

Think about that.

Yes, it means that the monthly payment on a $300,000 house will be higher a year from now than it is today. Not that much higher, though. 4.75% or even 5% is not astronomical. Mortgage interest rates were in the 6% to 7% range during the housing frenzy/bubble of the early 2000s and no one batted an eye.

Housing Inventory

I wrote above that housing inventory is very thin. It may not stay that way. New home builders are chomping at the bit to start building. All they need is a sign that there is the demand out there. The downside with new construction is that it happens to be a bit more expensive than existing homes (homes that you and I live in right now). So people need a larger income and a bit more stability in their lives. The “new” house is usually something for the person moving up into a larger house or someone relocating from another area.

So, unless a million people wake up tomorrow and want to sell their house, my guess is that housing inventory will remain slim.

Days on Market

This is the term we use in the real estate world to describe the number of days from the day you put your house on the market (Day 0) to the day you accept and offer to purchase your house.  This may be very short. It may be months.

I once had a listing that took a year to sell. It was a nice townhouse. The people kept it in meticulous condition. It just had two weaknesses.

  1. It was overpriced for most of that year (seller’s choice)
  2. The seller’s smoked (although they swore never in the house)

I can pretty accurately predict how long your house will stay on the market using three metrics:

  1. Is it priced competitively to your neighborhood comparables?
  2. Is it in great showing condition – clean and uncluttered?
  3. What is the average or trend in your neighborhood?

Some neighborhoods sell faster than others. Location. Location. Location. However, every house will sell at the right price. If it looks like Martha Stewart just came for a visit, that’s even better.

I also have access to empirical data that will show me the median and average Days on Market for you zip code and your neighborhood. Ditto price trends and more.

Predictions That Are Guesses And Those That Are Not

Some predictions are easier to make than others.

I have access to lots of good data that will show me trends and exact closing prices for the homes in your neighborhood.

Does that mean you shouldn’t ask for “a little more”. No. I’m all for trying to push the envelope a teeny bit. I’m very much against trying to get 5% to 10% over the last sold comp in your area. It’s fantasy and it will only be disappointing down the road.

Having said that, I’ll readily admit to being surprised by appraisals I thought would never come in at the contract price that did. I’ve also had a little string of low appraisals come in during 2015. $15,000 low. That’s low.

So there are a few of my predictions for the housing market in 2016.

  • Home prices up by 3% to 5%
  • Mortgage interest rates up by, maybe, ¾%
  • Housing Inventory holding steady
  • Days on Market — depends on you

Give me a call or e-mail me for a customized analysis of your home. I’m here for you. 240-417-9100 or ken@mdsuburbs.com

 

About Ken Montville

Ken Montville is a Realtor® and Associate Broker with RE/MAX United Real Estate in the beautiful Maryland Suburbs of Washington, DC. He has been selling nice homes since 1999. Way back in the 20th Century.

When Ken Is not doing the real estate thing he can be found all over social media in places too numerous to mention and he listens to jazz, reads a little (mostly non-fiction), hangs out with the Rotary Club of Parole (Annapolis), MD and can be found blogging at MDSuburbanHomes.com