U.S. Housing - What's on the Horizon?
A look back at the market in 2015
2015 produced major growth and some really nice milestones in the housing recovery. Total home sales grew 7% over 2014, marking the best year since 2007. The improving economy, pent up demand, and strong affordability brought more millennials and other first time buyers into the market. Home sales to buyers relocating or those changing jobs were up 8% as the U.S. saw around 2.8 million jobs created.
Buyers age 35-55 accounted for nearly half of all sales in 2015. Older buyers are more likely to have better credit profiles and larger savings or home equity to use as a down payment. Buyers 34 years and under accounted for 28 percent of all buyers in 2015.
Renting has become very expensive in many parts of the U.S. Between household formations prompted by the improving economy and the difficulty or reluctance households face in purchasing, demand for rentals has grown. Nationwide, average rents increased by 3.6% for a 1 bedroom and 2.6% for a 2 bedroom over the last year, continuing a year over year upward trend.
What’s on the horizon in 2016
For those who purchased their homes 8 to 10 years ago at the height of the real estate bubble, they have gained very little equity during that time. A national average of just $3,000 or 1%, according to Jessica Lautz, the National Association of Realtor’s managing director of survey research and communication. However, according to a recent Harris poll, the share of Americans dreaming of owning a home is trending up. However, the perception of those polled show 1 in 5 Americans believe it will be harder to get a mortgage in 2016 because of looming interest rate increases.
Another factor impacting the home sale market is the lack of quality available inventory. Sales of existing homes rose by nearly 9% in September 2015 over September 2014. This demonstrated a release of pent-up demand by homeowners who had regained equity to sell and trade up. However, when you combine that with homeowners who might want to move but are not in position to as they don’t have equity, along with a notable lack of newly built homes, this produces the shortfall of homes available for sale in the market today.
We see a clear shift in the rental market as well. Most people may believe that renters are the younger generations. However, since 2005 when the upward trend in renters across the nation began to increase, those in their 50s and 60s are now making up largest age demographic increase. Why you ask? The 2008 housing collapse that led to a wave of foreclosures has turned some people off to homeownership. The tight credit market also plays a part, and not everyone wants to be a homeowner in their golden years. Renting can often lead to a new lifestyle. The amenities available can be very appealing to older renters as well.