Real Estate Market 2016

    According to Inc. magazine, here are 5 things they expect will change in 2016.

    1. High Rents Will Go Higher.

    America’s 43 million renter households spent $535 billion on rent in 2015, up $19 billion, or 4 (3.7 %) percent in 2014 according to zillow. For you local Boston folks, here is a statistic you might not like unless you are a landlord. The average rent in Boston tops $2,000 in a recent article according to Boston Business Journal. This is in the midst of growing inventory and new apartments hitting the market increasing the vacancy rate.

    Maybe its time to buy a truck like one google employee did and call it home.

    2. Mortgage Rates Will Go Higher

    As of Jan 13, bankrate.com reported 30 year mortgage rates at 4.05%. As the fed is looking to hike rates this year, the current low interest environment plays favorably to those who are looking to buy a home to live in. I have mentioned in one of my prior blog post “The payment on a 30 year $300,000 loan will increase 12% for every 1% increase in interest. At 4% the payments will be $1,432.25, at 5% the payment will be $1,610.46 on the same $300,000 loan.” Every 1% increase in interest could mean a lot of interest over 30 years. In this same $300K example, 1% increase would mean an extra $64K interest over the term of 30 years.

    3. Millennials Will Drive Sales, But Not As Much As in 2015

    Millennials account for about 1/3 of all first time home buyers. As the cost of renting vs owning converge, those who college educated grads with less debt and a comfortable income might consider owning as the their mortgage won’t go up as compared to rents. However college grads coming out of school with significant debt and impacted by stagnant wages will have difficulty with accessing credit. Furthermore saving for a downpayment is still difficult for Millennials, however with a variety of low down-payment financing options available, home ownership can be achieved. I still advise always buy within your budget and understand all the costs associated with home ownership.

    4. Gen Xers Will Be There, Too

    According to the Inc article, Gen Xers are often in the “financially recovering” category. That is, they’ve made some mistakes with their money or struggled during the Great Recession. In 2016, look for them to emerge as viable home buyers.

    In some cases, Gen Xers will sell their primary residence to move to a better neighborhood. This will help with the low inventory and moderate the growth in home prices.

    5. It’s a Good Year to Sell

    According to bankrate.com, “Sales of single-family homes will rise modestly again in 2016 and median sales prices should be up 3% to 5%”. In a previous post, I mentioned that my last listing in Everett sold at 105% of the original price, tells you that buyer demand is still strong. Furthermore in the state of city address by mayor Marty Walsh, increasing housing stock was on his agenda. “Close to 4,900 housing units started construction in 2015, and more than 1,000 of those units were affordable — a record on both counts – and 3,800 homes completed construction last year.” If we are in a market with low inventory and more inventory is expected to hit the market, you can expect that prices will moderate as housing supply increases. I heard this phrase in a business meeting once, “you strike when the iron is hot”. Definitely resonates if you want to get the most for your home.

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    For more information, please contact Peter Vuong.

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