This is my special edition of real estate predictions for 2016. The first edition was not published because they were so accurate and on point that even I was worried about how prescient a real estate professional could be on these matters. Case and point: My predictions for 2015 were much better than one might have anticipated. This was especially so since Federal Reserve Chair Janet Yellen did a Babe Ruth two weeks ago, stepping up and raising interest rates; but not before pointing to the far stands, to signify a home run coming up for all the detracting bondholders who said it couldn’t be done.
And while the standard fare among those who are “right” on all matters related to real estate, my edict will not contain the sinister thirteen predictions — but seven very lucky predictions — since that was the same numerical value of the last predictions of the year
And like an athlete who doesn’t change his jockstrap when he’s on a winning streak (which will eventually result in a visit to the dermatologist), this real estate writer won’t change course or deviate from seven predictions. A repeat, if you will, as I point to the bleachers… and let it be known that this is for all the naysayers who believe in negative amortization, and who doubted the resurgence of American real estate.
Prediction One: Thy Hot Market for 2016 (and Miss America Runner-Up)
Without a doubt, Miami is an international destination for vacationers and has become a world-class resort community, attracting home and condo buyers from around the world. If there has ever been a time to buy a home in Miami this decade, this is probably it.
The runner-up? Well, according to Housingpredictor.com, it’s San Francisco. Big hooray! In the opinion of some, it is the rich and diverse cultural mix of the people who have transformed the Greater Bay Area into a world-class city for many decades, and who have made it their home. Well, that’s no surprise, and since there are more millionaires living on that peninsula than anywhere else in the US, it doesn’t hurt that most buyers pay cash for all homes.
Prediction Two: Those Damn Millennials
Why not go in the horse’s mouth when you’re trying to prove a point in a calculation that might be best left to real estate investigators? Such is the case for Ms. Svenja Gudell, recently appointed chief economist at housing site Zillow.com.
“Millennials are going to be bigger and bigger buyers in the market in the future. I don’t think next year we’ll see a rush of millennials in one month or another. They’ll just keep coming. They’re taking their time to get to the market and buy a home Marry later in life Have children later in life Therefore make home buying decisions later in life
One problem is that inventory is very low, especially at the lower end of the price distribution. There are very few of those available, especially in these markets that have the most jobs. That is particularly the case on the coasts. It is a challenge for them. It is a difficult market. There’s a lot of competition.”
Prediction three: the bigger something-something-but-not-actually the better
In the interest of giving Ms. Gudell a little more airtime, this is her take on bigger is better when it comes to whether houses will get smaller or bigger, or whether lots will get bigger. bigger or smaller. “It’s hard how many new homes are available, but there is a trend among builders to build larger homes on smaller lots. Land is quite expensive, so they are trying to maximize their profits due to high land costs “.
Prediction four: expect the “new normal” to be normal
Another economist has to step in where Zillow.com’s Ms. Gudell left off, and that’s Jonathan Smoke, chief economist at realtor.com®, who believes:
“This slowdown is not an indication of a problem, it’s just a return to normal. We’ve lived through 15 years of truly abnormal trends, and after removing the devastating effects of the housing crash, we’re finally seeing signs of a more normal condition. .” New construction and distressed sales are expected to return to more historic levels, and home prices are expected to continue at “more normal rates consistent with a more balanced market.”
Prediction Five: Drones on the ground
Technically speaking, if you’re a real estate agent, you still need an FAA license to photograph houses for marketing purposes. To date, there has only been one real estate broker who can photograph properties with a drone, and that is Douglas Trudeau of Tucson, AZ, the first agent to receive a waiver under FAA rules that allows a real estate professional to roots take pictures.
So, will 2016 be any different for tech-savvy real estate agents who are about to get carried away by their newly purchased Radio Shack drone? dollars when they start lobbying the president of the FAA in 2016.
Prediction Six: Mortgage Rates—————————————————————————————————————————————————————————– uuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuuu ng!
Mortgage rates are likely to be volatile in 2016. But the Federal Reserve’s recent move to raise interest rates should push mortgage rates higher in the new year than the record lows they’ve been at for years, all according to a career industry professional. The 30-year fixed-rate mortgage is likely to end 2016 about 60 basis points above current levels.
This according to Jonathan Smoke of the NAR. “That level of increase is manageable, as consumers will have multiple tactics to mitigate some of that increase. However, higher rates will increase monthly payments, and along with that, the debt-to-income ratio will also increase.” Markets with the highest home prices will see the most effects from higher rates.
Most of the mortgage rate divas — guys and gals alike — predict chaos in 2016. If you call 50 or 60 basis points chaos, then I have some properties in Florida that I’d like to sell you. For those who aren’t sure what 50 or 60 basis points is, it’s about a half point higher on your mortgage rate. (100 basis points is 1% percentage point). So, given that the market average for a 30-year fixed-rate home mortgage is around 5 percent, when you can expect the prevailing rate in December 2016 to be around 5½ percent.
Prediction Seven: FannieMae Brings Home the Bacon
We’ve all heard of quantitative easing (I think). So we won’t be expecting a return to the 2000s, where all you needed was a heartbeat and zero down payment to close on a house. In 2016, there are new loan programs underway that make qualifying for a loan a little easier. According to TheStreet.com, Fannie Mae intends to make it easier for qualified borrowers to receive a loan. Mortgage underwriting across the industry is beginning to reflect the improvements.
To complement this trend, Fannie Mae recently opened the door for more borrowers to receive a loan. Qualified borrowers can now put as little as 3% down on a home. Perhaps even more important, however, is the implementation of the HomeReady mortgage program. Look for more of that program to be adopted by some of the biggest banks in 2016.
In the final analysis, there are many economic and non-fundamental fundamentals that will affect the trajectory of home prices, trends, and technology and lender practices in 2016. I’ll tell you in 2017 if that was true.