Freddie Mac – 2016 Will Be The Best Year In Decades
Freddie Mac officials say that 2016 is shaping up to be the best year in decades. Home sales, construction housing starts and house prices are set to reach decade-level highs. The reasoning for the big, bold predictions are as follows:
Low Mortgage Rates
Number one is low interest rates. In 2015 interest rates on 30 year fixed rates remained above 4%. As 2016 started interest rates started to decline and now remain below 4%. Lower interest rates make home buying more affordable. These lower interest can help buffer the higher home prices and the fact that salaries are not growing. The 30 year fixed rate mortgage has been holding at 3.71%. Expect the 30 year rates to remain attractive throughout the spring home buying season according to their current outlook.
The multifamily housing supply are increasing according to Freddie Mac’s data. Multifamily starts have been solid at 300,000 for the past 3 years. But construction in the single family homes have remained below what is needed to meet demand.
The labor market in America has been holding up well, producing an average of 205,000 net jobs per month since 2011. This steady increase has brought the unemployment rate to below 5%. On the downside labor force participation has fallen with no signs of recovery and wage growth remains tepid. Believe negative news actually has an upside to it. If the average net jobs continue to increase without the labor market adding more people to it wages will have to go up. (Remember your Econ 101 classes and supply and demand.)
Best Year In A decade
With demand picking up, supply lagging, the lowest interest rates in memory and you have the perfect conditions for home prices to rise through 2016 and into 2017. Higher prices will drive up home owners equity. According to CoreLogic, in 2009 26% of home owners where under water. Today that number is 8.53%. Despite everything on the negative side of the housing market Freddie Mac still see’s a robust real estate market with increasing values. They expect housing starts, home sales and housing prices to reach their highest levels since 2006. Low interest rates and an improving labor market including modest income gains will help drive housing markets higher
Freddie Mac website is http://www.freddiemac.com/
Author is Milton Weiss and is head blogger of www.southfloridaguide.net and soon to open www.livinginflorida.net