U.S. housing market expansion expected to continue in 2016
Housing prices in the U.S. have risen by around 6% over the past 12 months and, barring any major economic downturn, demand for housing should support additional growth in home prices next year. Researchers at CoreLogic have noted five factors that will affect the housing market in 2016, based on assumed overall economic growth of 2% to 3% in the United States.
First is an expected increase in the Federal Reserve’s policy rate of around 1% between now and the end of 2016. That will affect adjustable-rate mortgage holders and cost new fixed-rate mortgage borrowers an additional half a percentage point, pushing mortgage interest rates to around 4.5% by the end of 2016.
Second, more than 1.25 mln new households are projected to be formed in 2016, most of which will be seeking rental homes.
Third is continued strong demand for rental housing. CoreLogic expects rental vacancy rates to remain low and rent payments to rise faster than inflation.
Fourth, the owner-occupied housing market should see a rise in both sales and prices. Purchase demand may lead to the best sales year since 2007, and home prices could appreciate in a range of 4% to 5% during the year.
Fifth, mortgage originations for single-family homes are likely to decline by 10% in 2016, while new loans for multifamily properties are likely to rise. Overall, CoreLogic projects that total loan originations will rise by 10% to 12% and that home equity lending will also increase. Refinancings, however, could drop by a third. (Source: 24/7 Wall St.com)