2016 Housing Market Outlook
Overall, the Northern California's housing market enjoyed a good year in 2015, although a shortage of homes on the market posed a challenge for many homebuyers. Double-digit price increases from a year ago were common in many communities, along with multiple offers on some homes, while the limited inventory helped keep a lid on home sales.
As 2016 begins, many industry experts believe we're heading towards a more balanced market, one in which inventory will gradually increase and sales will climb at a moderate rate. If the forecast holds true, it could be welcome relief for potential homebuyers who may have been frustrated by last year's heated marketplace and the limited number of homes from which to choose.
The National Association of REALTORS® (NAR®) forecasts home sales nationwide to rise approximately 3 percent in 2016 to 5.45 million units, up from an estimated final tally of 5.3 million units in 2015. The national median existing-home price is expected to rise to around 5 percent in 2016.
According to Lawrence Yun, NAR's® Chief Economist, the pent-up demand for buying in recent years finally broke out in a meaningful way in 2015, thanks to sustained job growth and rising home values, which gave more homeowners the incentive and the means to sell – a trend that he expects to continue next year.
"Sales activity in 2016 will once again be primarily driven by the ongoing release of more pent-up sellers finally realizing their equity gains and using it towards the down payment on their next home," Yun said.
Although Yun anticipates further expansion in existing-sales next year, rising mortgage rates and supply constraints are two likely roadblocks that have the potential to slow the pace of sales from being even more robust.
Meanwhile, the California Association of REALTORS® (CAR®) is predicting that California’s housing market will continue to improve into 2016, but a shortage of homes on the market and a dip in housing affordability may persist.
The CAR® forecast calls for an increase in existing home sales of 6.3 percent next year to reach 433,000 units, up from the projected 2015 sales figure of 407,500 homes. The median home price is forecast to increase 3.2 percent to $491,300 in 2016, following a projected 6.5 percent increase in 2015. That would be the slowest rate of price appreciation in five years, the organization said.
“Solid job growth and favorable interest rates will drive a strong demand for housing next year,” said Chris Kutzkey, CAR® president. “However, in regions where inventory is tight, such as the San Francisco Bay Area, sales growth could be limited by stiff market competition and diminishing housing affordability."
On the other hand, Kutzkey noted, "demand in less expensive areas such as Solano County and the Central Valley will probably remain strong due to solid job growth in warehousing, transportation, logistics, and manufacturing sectors in those areas.”
Leslie Appleton-Young, CAR® Vice President and Chief Economist, said there are positive elements in place for 2016. “The foundation for California’s housing market remains strong, with moderating home prices, signs of credit easing, and the state continuing to lead the nation in economic and job growth,” she said.
So if you've been thinking about buying or selling a home, 2016 may be a good time to make your move. Industry experts are predicting a more balanced housing market with improving home sales. I know you may have questions about the market and the process of buying or selling a home. Please give me a call or send me an e-mail and I'd be happy to answer any of your questions and see if the time is right for you to get into the market.
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