6 economists forecast the 2016 housing market
Trends, forecasts and more from some of the most prominent economic minds in the industry
For housing, 2015 was a strong year, with home sales high and home prices continuing to rise. Overall, the economists surveyed were cautiously optimistic about 2016 when it comes to home prices, home sales, interest rates and the impact of loosening lending standards that have recently been introduced by government agencies.
Since 2016 is a Presidential election year, the economists were cagey when it comes to regulatory changes to Fannie Mae and Freddie Mac.
Here are some highlights:
Alex Villacorta, chief economist, Clear Capital: The two most important housing market trends to watch in 2016 will be the continued growth of rental rates and the moderating trend in home prices. The pattern seen in 2015 was largely characterized by a white-hot rental market, and if this continues, more households will likely choose to rent over buy in 2016.
Peter Muoio, chief economist, Ten-X: Wage growth will be the key new ingredient for the housing recovery. We have been watching signs of accelerating wage growth percolate through different data sources, but 2016 will see clear and convincing evidence of rising wages. This will help with housing affordability and be the final ingredient for higher household formations and housing demand.
Jonathan Smoke, chief economist, realtor.com: Demand for for-sale housing will grow and will continue to be dominated by older millennials, aged 25 to 34. This demographic has the potential to claim a third of home sales in 2016 and represent 2 million home purchases.
Douglas Duncan, chief economist, Fannie Mae: Lots of discussion of the need for subsidy but the real problem is lack of income growth for low and moderate income households. There will be a discussion of the regulatory cost of land development which is an inhibitor to production of low to moderate income affordable housing. Rents will remain strong as a result.
Matthew Gardner, chief economist, Windermere: I expect that we will see more homes for sale. Homeowner equity started to recover in 2013 and has been steadily improving since that time. As such, I expect that it will increase their likelihood of selling. At last — more inventory! But I fear that it will still fall short of the supply needed to match demand.
Mark Zandi, chief economist, Moody’s Analytics: The most important housing market trend in 2016 will be the developing housing shortage. New housing construction has picked up in recent years, but it remains well below that needed to meet demand from newly formed households, second home buyers, and obsolescence of the existing stock of homes. Rental and homeowner vacancy rates, which are already very low, will continue to decline. This will continue to push house prices and rents up quickly.