Housing Market Predictions and Data from RFG

by on December 16, 2015 5:54 pm under

2015 Was Good; 2016 Could be Great!

The real estate industry seems to be on the rise again — this time in a much more sustainable way. The past year was a prosperous time for companies in the residential real estate industry. This sector of the market generated $170 billion in revenue, while the commercial side generated $30 billion, both great numbers. We have seen the market on a steady incline over the last few years, but warning: we’ve also seen some issues rise along with it. If the lead up to 2016 is any indication of what’s in store, we predict that the upcoming year will be a great one for both RFG and our clients! Our other predictions are as follows:

Real Estate Sales Go Through the Roof

In 2006, total home sales boomed to hit record setting levels. This, of course, was before the crash which saw prices severely plummet — taking investor’s dreams of seeing positive ROI on the properties they shelled out hefty prices for with them. The Case-Sheller Home Price Index showed a loss of 33% from 2006 to 2012, but has shown a steady 10% rise every year since.

That brings us to 2016 and the high expectations that analysts have for the upcoming year in real estate. New home sales in 2016 are projected to increase by 16% while also becoming more affordable. This affordability accounts for a strong predicted purchase interest among millennials in 2016. Existing homes should reach 6 million units in sales. This would be the first time since 2006 that sales would reach this figure – a sure fantasy if presented to the real estate investor who experienced the crash and all of its hardships in 2008. We can’t always count on projections and analysts’ opinions, especially since the projecting numbers one month from now is a much easier task than projecting numbers 12 months from now. One thing we can say is that if the real numbers are even in the vicinity of what is projected, investors will be in for a successful year.

Home Loan Fraud will Increase

With the success that is forthcoming, something has to give. Naturally, as more loans are being approved and provided to real estate investors, lenders like ourselves will become more susceptible to damaging mortgage fraud. An inflow of applicants, and consequently approvals, means one thing for us lenders — suspicion. Rapid growth opens up opportunities for schemers and fraudsters. Fraud seems to go hand and hand with the success and failure of the industry over the years. This coming year is predicted to reach a high in fraud risk in proportion to the sales numbers above. As sales go up, so will fraud. What does this mean for the investor? Lenders will be asking more questions, doing more thorough due diligence, and have a higher attention to detail regarding just about everything. When we ask probing questions of our borrowers, we are hoping to better understand their situation and also guide them to success. Please know that when we ask questions, we have valid reasoning behind our inquisitiveness – just look at the numbers.

Improving Wages will Indirectly Help the Real Estate Market

Michael Fratantoni, MBA’s Chief Economist and Senior Vice President for Research and Industry Technology was quoted as saying, “We are forecasting that strong household formation, improving wages, and a more liquid housing market will drive homes sales and purchase originations in the coming years.” Wages play an important indirect factor in the growth of the real estate industry. Just like sales is synonymous with fraud rate, so too are wages. Consumer spending always increases with an increase in wages. With a projected economic growth of 2.3 percent, consumers are more comfortable with their financial future, making them prone to make larger buying decisions. This is certainly a positive for the home buying market but negatively impacts the rental market. With the increase in wages, the consumers/investors are more prone to entertain buying a home rather than rent. That, combined with the fact that rent prices are soaring (they’ve increased more than home values in more than half of the largest markets in the U.S.) makes the consumer more likely to buy a home.

Buy, Sell, or Hold?

2016 will be a real estate investors dream compared to the last few years of the 2010’s. Also, where there is a market that is on the rise there are ample investors in line to test the waters. This upcoming year seems likely to be a successful one but even more likely to be a competitive one. Are you ready?

Leave a Reply

Your email address will not be published. Required fields are marked *