Roseville, Calif. – Last years housing market was the best since the recession but will likely slow down in 2016. According to the National Association of Realtors (NAR), the slowdown will be caused by an ongoing shortage of inventory and rising interest rates for mortgages.
At a recent real estate conference, Lawrence Yun, chief economist for NAR, explained the 2015 housing market was supercharged by pent-up demand of the last few years, wage and job growth and rising home values. He went on to say existing home sales this year will slow to a more moderate pace.
On a National basis, home sales for 2015 were about 5.3 million and are expected to expand in the 3 percent range to 5.45 million due to rising rates and supply constraints. On the new construction side 2015 saw about 505,000 in new home sales and are expected to increase to about 590,000 in 2016. Yun predicted, most of the sales activity in 2016 will be driven by sellers who are finally able to realize equity gains and list their homes for sale, using the proceeds to fund down payments on their next home.
“Another year of stronger housing demand and sales will be driven by increasing consumer confidence and solid job growth – especially in the states in the West and South that are leading the rest of the pack and will continue to see further job creation,” Yun said. “The one variable to even higher sales will be if supply can keep up enough to keep a lid on prices, especially with mortgage rates on the rise.”
Yun also noted that the share of first-time buyers fell to its lowest level in nearly 30 years last year, and he attributed this trend to student loan debt, competition from similar homes on the market and lack of affordable inventory. “Even among recently successful first-time buyers, 41 percent have student debt and the typical amount is $25,000. Repaying this debt during a period of flat wage growth and sharp rent increases only makes it more difficult to come up with the cash needed for a down payment,” Yun said. “Their emergence back into the market will be a gradual one, but our data does show that young adults view homeownership as a good financial investment and part of their personal American dream.”
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