2015 Was Great For Real Estate, But What’s Next?

2015 Was Great For Real Estate, But What’s Next?

January 30th, 2016

December’s sales numbers are in, and with the strong finish to the year,  2015 actually ended up as the best year for home sales since 2006.  That’s right – even though the numbers were way below ’06’s peak, existing home sales were the highest since the historic housing boom.

So, should we be nervous that there’s another bubble about to burst?  Not remotely, if you consider the current conditions, and the consensus forecasts for 2016 agree.  All signs point to the housing market remaining strong this year (despite mixed performance from the broader economy).

2016 has started off as pretty rough year for the stock market, and the global economy is shaky, so there’s a fair amount of concern about the US slipping back into a recession.  Most experts are actually predicting slow growth, rather than outright decline in most areas, and Real Estate may still be one of the bright spots.  

Job growth is continuing, while home inventories are still small, so demand is still very strong for homes.  Meanwhile home builders have been very cautious about building and are still well behind normal inventory levels.  This, combined with stricter loan standards since the boom, are some of the reason we don’t need to worry about a repeat of the bursting bubble.

Liar loans and higher setting ARMs helped lead to the mortgage meltdown, but lenders have pulled back on credit and, if anything, are now probably overly stringent on who they give a loan too.  We may have seen strong rises in home values (especially in some urban markets) recently, but this time, the fundamentals are more sound and it’s not being fueled by loose credit standards.

There are a few other good trends from last year that should have some positive carry-over through 2016.   Distressed home sales (foreclosures and short sales) were down, and average days on the market were also down.  Most homes were selling in less than 2 months, and a big chunk of those were selling in less than a month.

Prices were up, quite a bit, last year – a good thing for sellers, but what about buyers?  Forecasts are for prices to continue to increase this year, but not at quite the same rate as last year, and that leveling-off or normalizing of price growth should be good for buyers.  Not to mention that interest rates spent all of last year around or under 4%, and have now eased back down to 8 month lows at 3.78%!

Even if we don’t see the 7% price growth we had last year, the forecast is for around 5%, which is better than the 2.2% loss the Dow had for 2015!  So maybe rather than stressing ourselves too much about the Chinese economy dragging down our stocks, we should be betting on Real Estate again in 2016.

Look for more on this and on some big trends to watch this year in the next Blog!  And if you have questions or are looking to make your next move, contact us for any of your Real Estate needs!