2016 Real Estate Trends

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Real estate trends for 2016

Real estate trends for 2016 are looking great, which may come at a surprise to some of you considering how well the market did in 2015. Can the momentum really keep going? The short answer, according to various reports, such as Emerging Trends of Real Estate: Yes.

The last couple years were the best the housing market has seen since 2007. While 2016 is off to a slower start than 2015’s market, investors and buyers should not worry about another decline any time soon. The market does vary from location to location, year to year, but with a decreased unemployment rate, things seem to be looking up in many areas. If you are looking to buy your first home (or a new home), you will want to consider the local job market first. Furthermore, this slowed pace is just an indication of the market returning to normal conditions after years of suffering from the housing bubble.

Before we look at this year’s real estate trends, let’s look at some of the contributing factors of this growth in recent years:

  • First, millennials have different spending priorities than previous generations, and they will have a major impact on the economy, according to this report by Goldman Sachs.  As Gen Y becomes more financially savvy, they are choosing investments they can make money on. Luckily for the housing market, homes are one of those investments. Despite it taking longer for millennials to start families and purchase homes than Gen X and Baby Boomers, they are contributing to this rise in the market and actually make up a large portion of first-time buyers.
  • Locations like Austin, Seattle, Denver, San Diego and Portland are among Emerging Trends 2016’s list of top 20 markets for real estate and development. The report also attributes this to the fact that many of these locations doing well in the market are also on the Kauffman Foundation Study top 10 list for entrepreneurship. Because of this, they are seeing many young business owners relocate to these areas for more opportunities.
  • Baby Boomers are reaching or are currently in retirement age and looking to downsize. This means more real estate opportunities in both selling and buying.

While many other factors contribute to the recent rise in the housing market, such as technology and globalization, here are some key trends happening in 2016 for real estate:

  1. A great year to sell. We’ve already mentioned the impact Generation Y has had on the market, but as millennials are reaching their prime spending years looking to purchase their first home, Generation X and Baby Boomers are looking to decrease their cost of living, after already spending years as homeowners. This means their contribution is a double function on real estate. While your local market does still determine the supply and demand of homes, this seems to be a trend across the board that will impact suburban areas, especially from those looking to start a family.
  2. The spotlight is taken by 18-hour cities. Areas defined as 18-hour cities, such as Portland and Austin, are perfect for millennials looking to advance in their career. These second-tier cities are developing rapidly and typically have a lower cost of living, hence their attraction to the younger crowds. They also provide lower costs for doing business along with similar job opportunities as the big scale cities, such as New York City and San Francisco. The 18-hour cities are perfect for investors right now, and 2016 will see more real estate investment options. It’s a great time to jump on this bandwagon.
  3. More office space comes in demand. With the rise of entrepreneurship and job growth in recent years, office space is also becoming more in demand. This means less vacant rental space for realtors and an increase in rents. An open floor plan is the latest trend for offices in addition to co-working spaces, thus resulting in a change in layout and design. These factors have all been helpful in strengthening commercial properties.
  4. Mortgage rates will slowly increase. Although there is a decrease in distressed sales property, mortgage rates are expected to slowly increase. The increase will mostly seem to be manageable as homeowners will begin to get creative with alleviating the amount such as utilizing opportunities through Airbnb. It will need to be taken into consideration, though, as this could mean borrowing more money with higher interest rates. Areas with the highest mortgage rates will see fewer (or slower) sales in real estate; however, the good news is that the pressure for affordable housing is on the rise. This brings me to the next trend:
  5. New homes to be more affordable. In previous years, new-home prices have been rising much more than existing-home prices, which makes it difficult for lower- to mid-level income folk to purchase a new home. Despite the profitability of building luxury-style homes, it limits potential financial growth and entry-level sales.  This year should see a shift from this strategy as home-builders begin to create a more affordable product.
  6. Unaffordable rents posing a problem. The cost of rent is excessively high in most of the United States, which is pushing people more toward home-buying options. This may seem like a positive trend toward real estate, it is in fact a concern. Due to low credit scores, limited savings and the like, purchasing a home for renting households is not an easy solution. The housing market does depend upon multiple key factors, and affordability and the economy are among them. If individuals are spending half of their income on rent, it can predictably hurt the overall well-being of the housing market.

Whether buying or selling, you always want to pay attention to your local market to determine what is best for you. Overall, as an investor or consumer, these key real estate trends should help to guide you along and keep you in the loop of what is happening and what is to come. In addition, it’s important to stay updated on the housing market regardless if you are currently involved in real estate. Consider these, along with location, before making your next big move.

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5 thoughts on “2016 Real Estate Trends

  1. Great analysis on real estate trends. I bought a house last year, and I am glad that I did because 2015 seems to be a better year than this year. But, let’s hope for the best as we’re still in the half of 2016.

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