Deteriorating housing affordability will drive 2016 housing trends, according to a recent Zillow forecast. A lack of affordable homes near city centers will push new and first-time homebuyers to suburbs that feel like walkable, amenity-rich mini-cities. Rising rents will force more young renters to wait longer before buying a home. And the looming threat of rising mortgage interest rates will slowly erode some of the terrific mortgage affordability the market has enjoyed for the past few years.
“Rents will continue to increase at a brisk rate in 2016, but many potential first-time buyers are living in hot markets where buying a home is really expensive,” says Zillow Chief Economist Dr. Svenja Gudell. “In 2016, we’ll start to see more people in hot coastal markets forced to move further from the core of the city to find housing.”
2016 Housing Market Predictions
1. The median age of first-time buyers will reach new highs in 2016 as millennials put off homeownership and other major life decisions.
2. Growth in home values will outpace incomes, especially for low-income Americans. In 2016, those whose incomes fall in the bottom third of all incomes will be priced out of homeownership and unable to afford even the least expensive homes on the market.
3. Rising rents won’t let up in 2016, and will continue to set new records. The next year will bring the least affordable median rents ever.
4. As affordable housing close to city centers grows increasingly scarce, people will move farther out. Dense, walkable suburbs with an urban feel – especially those that offer good access to the city – will be 2016’s new hot spots.
5. The median expectation of more than 100 economic and housing experts surveyed in the latest Zillow® Home Price Expectations Survey was for home values to grow about 3.5 percent in 2016.
“As renters gradually transition into homeowners, the historically low homeownership rate should stop falling quite as quickly as it has been,” says Gudell. “However, the median age of first-time homebuyers – already the highest it has ever been at about 33 – will climb higher. Millennials want to buy, but they are waiting longer than previous generations.
“All of this will happen against a backdrop of slowly increasing interest rates. That will make some homeowners think twice about selling, and many of them will decide to remodel their current homes instead.”
For more information, visit www.zillow.com.
