Economists are hopeful that housing market activity — and prices — will continue to perk up generally in 2016, due to a number of factors. The most important catalyst for housing is the improving economy and employment landscape. As Americans feel more confident about the economy and more secure in their jobs, they will be more willing to take the big step of home ownership.
At the same time, despite the Fed’s first rate increase, mortgage rates remain low and banks are finally loosening credit conditions. Both of those factors are drawing more buyers into the market, further increasing housing demand.
One interesting group is the “boomerang buyers” — homeowners who lost their homes during the recession and are ready to jump back into the market. Some 7.3 million Americans lost their homes to foreclosures or short sales — two events that can stay on your credit report for up to seven years — from 2007 to 2014, according to real estate data company RealtyTrac. If they have no other major credit issues lingering, those first foreclosed owners are now coming out of the financial doghouse and qualify for a mortgage. RealtyTrac projects that 250,000 to 500,000 boomerang-ers will come back into the market this year, with another million or so more in the next few years.
One last group that could help boost the housing market is millennials, those aged 18 to 34. Sure, many of them are spooked by home ownership, because they watched their parents navigate the Great Recession and they themselves are graduating college with a hefty chunk of student loans. But young professionals may find that a fixed-rate mortgage is the perfect antidote to rising rents. And when they do come to that realization, the nation’s homeownership rate — which at 63.7% in the third quarter of 2015 was near multi-year lows — should reverse course.
If you are entering the market as a buyer, be crystal clear about what you can afford; remember to factor in not only monthly payments but also taxes, insurance and occasional home repairs. If you are planning to get a mortgage, go to AnnualCreditReport.com and correct any errors on the report before you start the process, which will make it easier to get pre-approved.
If you are a seller, price your house reasonably. Realtors say the first three weeks of a home’s entrance on the market are the most critical for attracting buyers. If your initial price is too high, the house may sit idly on the market. If there’s no action for three to four weeks, it’s time for a price cut.