MONEY Housing Market

Predictions for the 2016 Housing Market

Ride-Along With A Realtor As U.S. Housing Market Looks To Rebound in 2015
Wright, Ty—Bloomberg/Getty Images

The Fed has raised interest rates, millennials are getting what does next year's housing market look like?

No housing expert has a crystal ball, but Svenja Gudell, recently appointed chief economist for the housing site, has looked at enough data to make a pretty good guess.

She examines vast amounts of housing market statistics—everything from about where people are going to want to live to what areas will be hot to what the future could hold for renters—on a daily basis.

Reuters asked Gudell to share her insights on what she thinks the 2016 housing market will be like.

Reuters: What markets do you think will be places to watch in 2016?

Gudell: Next year, the combination of unemployment, population growth and the home value growth will make markets like Boise, Idaho, Salt Lake City, Utah, and Omaha, Nebraska, stand out.

Denver, Seattle, Dallas/Fort Worth and Portland, where inventory has been declining in the last year and demand continues to rise, will also be hot locations in 2016.

Are there some areas we should just give up on, instead of waiting for them to recover from the recession?

No. Cities are pretty good at reinventing themselves. There’s a city out there for everyone.

Location always matters in real estate, but are there any adjustments to that rule in 2016?

We have fairly low inventory in the cities. So next year, we’ll see first-time home buyers looking at suburbs—not just any suburbs, but those that are more dense, more walkable.

We’re also going to see an uptick in the number of condos being sold – especially for first-time home buyers. For a lot of folks, life happens not just inside their four walls but outside of them. Location, cost itself and nearby amenities will be most important.

Now that the Federal reserve has officially started to raise interest rates, what will the ripple effect be to the mortgage market in 2016?

Markets really haven’t reacted much. A lot of the expectations of the rate increase have already been built in.

As rates continue to rise—there will probably be four increases of 25 basis points each – we will start to see more of an impact at the coasts, in areas like Seattle, San Francisco, New York, and Miami.

These are already markets where people are already stretching. But, overall the effects will be relatively muted.

Is 2016 going to be the year millennials begin buying houses, now that they are older and the market is more recovered?

I feel like that was our prediction this year and it turns out we weren’t right.

Millennials are going to be bigger and bigger buyers in the market going forward. I don’t think next year we’re going to see a flood of millennials in one month or another. They’ll just trickle in.

They’re taking their time getting to the market and buying a home. They’re getting married later on in life. They’re having children later on in life. So they’re making home buying decisions later on in life.

One issue is that inventory is very low, especially on the bottom end of the price distribution. There are very few of those available, especially in these markets that have the most jobs. That’s particularly the case on the coasts. It’s a challenge for them. It’s a tough market. There is a lot competition.

What kind of new house trends are on the horizon for 2016? Are there any upgrades that are must-haves?

It’s tough with how few new homes are available, but there is a trend among builders to build larger homes on smaller lots. Land is fairly expensive so they are trying to maximize their profits given the high land costs.

Should we be optimistic or pessimistic or patient about housing in 2016?

I’m an optimist. I like to see the silver lining, but there’s going to be a lot of hurdles.

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