2015 was the best year for the housing market since the subprime mortgage and financial crisis that began in 2007, which lead to the Great Recession. With the recovery fully realized and growth still expected, many analysts are reining in the hope for 2016 to something more modest than the amazing strides made in 2015.
Chief economist of the National Association of Realtors, Lawrence Yun, predicts growth in home sales for the coming year, but describes it as moderate. The reasons given for this are a combination of the expectation of limited economic growth, affordability of property, and a swell of buyer demand. Fitch Ratings, one of the three nationally recognized statistical rating organizations designated by the U.S. Securities and Exchange Commission, says of interest rates that
“By the end of 2016 Fitch expects mortgage rates to rise by between 25-50 basis points, with the possibility of upside risk emerging as the Fed raises rates to 1.25%. The increase in mortgage rates will incentivize lenders to broaden loan eligibility requirements, as refinance volume is likely to dry up.”
Fitch also agrees with NAR in the expectation that home prices will experience slow, albeit steady, growth. They note also that declines are expected in affordability while indicating that the mortgage performance recovery will continue. Both agree in their outlook that mortgage volume will decrease because of rising rates and thus home prices.
You can watch NAR Chief Economist, Lawrence Yun, deliver his analysis in this video on NAR’s website, and then let us know your own expectations in the comments.