Maybe you are thinking about buying a home or selling your current one? Or you are considering investing in real estate? Then, you need to know the current real estate market trends in order to be able to make a reasonable decision. After the collapse in 2008, the housing market has been on the rise in the last couple of years. Generally, these positive trends are expected to continue in 2016 and beyond. But let’s look at some specific real estate market trends at the moment.
1. Secondary Markets Are the New Hot Thing.
One of the most significant current real estate market trends is that as 24-hour cities like New York and San Francisco are getting way too overcrowded and largely unaffordable, real estate investing will move to new 18-hour cities such as Memphis, San Diego, San Antonio, Austin, Nashville, and Portland. While these cities already have the urban appeal of trendy restaurants and clubs, they also benefit from lower cost of living, constantly increasing ease of staying connected, and more affordable house prices. These characteristics make them attractive to both young families looking to buy their first home and real estate investors looking for profit.
Related: 4 Reasons to Buy Airbnb Investment Property in Austin
If you are interested in following this new real estate market trend and are considering the option of buying a real estate property in a secondary market, Mashvisor can provide you with valuable analytics for hundreds and hundreds of locations throughout the US.
2. There Will Be Migration to the Suburbs.
Although millennials (aged 18-34 years) have long been portrayed as people obsessed with urban living, recent data show that most of them actually desire a single family home in a location with good schools for their kids. On average, millennials are starting families later than previous generations, but many of them are about to have children in the upcoming couple of years. In 2015 80% of millennials wanted to own a home, an increase from 65% in 2011 and from 78% in 2014. Thus, another of the major real estate market trends at the moment is a heightened interest in the suburbs by this particular group of future house owners. Naturally, these will not be the suburbs of yesterday as these regions will need to develop in order to adapt to the needs of this new generation of home buyers.
3. First Time Home Buyers Dominate the Market.
Despite reviving in the housing market and relatively low interest rates in the last few years, the real estate market has been and will continue to be dominated by first time home buyers. One reason for that real estate market trend is the growing interest of millennials in buying their own home as they come of age. In 2015, they already accounted for a third of all real estate sales, and this proportion is expected to rise in 2016. Another reason is that distressed sales are very low after the recovery from the recession. Even though baby boomers are starting to look to downsize their homes as they approach retirement, these transactions are not enough to surpass the first time buyers.
4. Affordability Remains an Issue.
Another of the important recent real estate market trends which is expected to last throughout 2016 is affordability of available homes. While affordability or rather the lack of such has been an issue for awhile, addressing this problem is turning into a must now. In 2015 about 3% of the real estate market was unaffordable to the average Amerian wage earner. An increase in the interest rate, a further rise in home prices, or a slow growth in wages could drive the share of unaffordable markets up to as much as 25%. The nature of the real estate market makes it just too profitable to build large, luxurious units, but the reality is that home buyers cannot afford buying and then taking care of such homes. Thus, the real estate market will need to shift towards smaller, truly sustainable, green building in order to satisfy the demand.
5. Housing Prices Will Increase by 3%.
Real estate market experts expect home prices to go up by 3% in 2016 on average across the nation. This moderate forecast rise is at the lower end of historical increases and well beyond the 6% increase in 2015.
6. The Interest Rate Is on the Rise.
The Fed is expected to increase the interest rate in 2016, which will definitely have some impact on all in the real estate market – those buying, those selling, and those renting. As the Fed strives to keep inflation in check, interest rates are set to go up, thus raising the cost of credit for those seeking to buy a home. The good news is that the rise in long-term mortgage rates is expected to be only gradual this year, keeping mortgage rates at levels well beyond those prior to the recession. While 30-year fixed-rate mortgages averaged a bit below 4% for most of 2015, they are forecast to average 4.4% in 2016. This real estate market trend will affect first time home buyers the most. However, such a relatively small increase should not be a reason to panic and is expected to discourage only a small proportion of potential home purchasers.
Related: How to Recession-Proof an Investment Property
7. Rents Will Rise.
Real estate forecasters expect rents to increase faster than inflation. The reason is simple: rental vacancy rates are at their lowest in the past 30 years. Although the construction of multifamily homes is continuing, it does not suffice to satisfy the high demand. High rents are causing trouble to millennials and others looking to buy their own homes. On the one hand, expensive rents are pushing people to seek to buy a home. On the other, spending so much money on rent makes it very hard to save up enough for a down payment. All in all, if you have been considering the idea of entering real estate investment, now might be a good time for you to become a landlord.
8. It’s a Seller’s Market.
The last of the major real estate market trends in 2016 is that the US housing market is a rather seller’s market at the moment. In simple terms, this means that current real estate trends favor those looking to sell their property rather than those looking to buy a home. The conditions which make the 2016 US housing market a seller’s market are: low property supply, high demand (once again the millennials), prices generally on the rise, strong labor market, and overall affordable mortgages.
Related: Is It a Buyer’s Market or a Seller’s Market?