*From Huffington Post – The Blog
Over at CoreLogic.com there is a lot of analysis of the housing and mortgage markets, including foreclosure information. Recently CoreLogic released their report 2016 Housing and Mortgage Rates Forecast.
They report that expectations for 2016 show that the Fed will probably raise short term interest rates by one percentage point gradually over the year. This is expected to cause mortgage interest rates to rise by around a half point, to around 4.5% for the 30-year fixed rate mortgage. Those of us who remember rates in the past averaging more in the 6% to 8% range probably aren’t too excited about these historically low rates.
However, particularly with first time home buyers, the mortgage interest rate influences the amount of the payments and the value of the home loan for which they can qualify. Even with discouraging mortgage rate increases, a modest increase in the number of home sales over those in 2015 is expected. Refinancing activity is expected to drop however.
An improving labor market is expected to spur household formations in 2016, with 1.25 million new households expected. More households will spur demand for both purchases and rentals, but rentals will get the most pressure. With rental vacancies already at the lowest levels in 20 years, rents should be rising more. This could move some buyers from renting back into the market.
Even with just a modest increase in the number of sales, it’s still going to be another consecutive year with more sales than in any year since 2007. Rising demand is going to help prices to continue to rise. The CoreLogic Home Price Index showed a year over year increase of 6% over the past 12 months.
It’s been a whole new housing analytical world since the housing and mortgage crash. We still have owners holding on and not listing, and that’s keeping inventories low. Depressed inventory is as responsible for rising prices as modestly increasing demand. First time home buyers are still avoiding the market in droves compared to pre-crash historical numbers.
At some point low inventories and rising demand could bring prices to a level that will bring sellers back into the market. Many are still making up for equity lost during the crash, and some are still underwater in their mortgages. When they do start listing in more normal numbers, then we could see some slowing of price increases and maybe more demand.
It’s tough predicting the new real estate markets. CoreLogic is one of many companies publishing reports and projections. I’m sure you can find others with different conclusions, and real estate investors have a constant stream of date through which to sift for trends. We are constantly evaluating our markets and seeking opportunities. I don’t see anything really negative about rental investing over the next few years, so have fun!