Real Estate Watch – Dan Conway
2016 Real Estate Began with a Bang!
In my previous article I wrote that the real estate market would continue to flourish. I’ll pat myself on the back – it’s beginning to explode! We already seen a healthy growth in home sales and pricing as an indication the marketplace is stable. Distress sales will no longer be playing a role, new construction is returning to more traditional levels, and prices will rise at a more consistent rate with a more balanced market.
Millennials emerged as a dominant force in 2015. This pattern will continue in 2016 as their large numbers combined with improving personal financial conditions will enable enough buyers between ages 25 and 34 to move the market. The majority of those buyers will be first-timers, but that will require other generations to also play larger roles. Those from Generation X are in their prime earning years and able to relocate to better neighborhoods for their families. Baby boomers approaching retirement are seeking to downsize and lock in a lower cost of living.
We should see a strong growth in new home sales and single-family construction as builders offer more affordable product. Buyers of all ages should consider new homes, but availability will be highly dependent on location, particularly in the desirable coastal areas.
I told you mortgage rates would go up sometime in 2015, and they did. However, they also went back down. The level of increase has been manageable, even though higher rates will drive monthly payments higher along with debt-to-income ratios increasing.
Rent is accelerating at a more rapid pace than home prices. I’ve seen asking rent on vacant units increase at a double-digit pace in the second half of this year. More than 85% of U.S. markets have rents that exceed 30% of the income of renting households. This trend does not bode well for the health of the housing market. It will improve when construction of affordable rentals as well as more of a pathway for renters to become homeowners.
For all your Real Estate needs stop into Dan Conway & Associates; Pacific Sotheby’s International Realty, at their office in The Piazza Carmel Shopping Center.
CA DRE LIC #01885744
3860 Valley Center Dr. Suite 409, San Diego, CA 92130