In 2015, the housing market reached its best year in nearly a decade, but 2016 will likely see a slowdown in many housing markets across the country. Home sales are forecasted to increase this year, but at a more moderate pace, “as pent-up demand combats affordability pressures and meager economic growth,” says Lawrence Yun, chief economist for the National Association of REALTORS®.
Taking the Long View
Yun says pent-up demand, sustained job growth, and improving inventory conditions will be the main triggers pushing the expected gains in new and existing-home sales this year.
However, Yun cites rising mortgage rates, home prices that still outpace wage growth, and a fragile global economy as the main challenges that could hold back a stronger pace of sales this year.
“This year, the housing market may only squeak out 1 to 3 percent growth in sales because of slower economic expansion and rising mortgage rates,” Yun says in a new video released highlighting his expectations for the housing market in 2016. “Furthermore, the continued rise in home prices will occur due to the fact that we will again encounter housing shortages in many markets because of the cumulative effect of homebuilders under producing for multiple years. Once the spring buying season begins, we’ll begin to feel that again.”
Yun, still crunching the final month of data for 2015, expects that existing-home sales will finish the year up 6.5 percent from 2014. That marks the highest since 2006 but is about 25 percent below the prior peak set in 2005 (5.26 million sales estimated in 2015 compared to 7.08 million in 2005).
Home prices were also up. The national median home price for existing homes is expected to near $221,200 for 2015 — about 6 percent higher than 2014. In 2016, existing-home sale prices are projected to rise between 5 and 6 percent, Yun notes.
Watch the video below for more from Yun’s forecast.