Real estate is one of the most fascinating market segments in this country. Market trends can be affected by everything from oil prices, to crime rates, to the seasons. So what’s happening this spring? What can we reasonably expect?
According to Realtor.com, Spring 2016 is shaping up to be the best housing market since 2006. Jonathan Smoke, chief economist for Realtor.com pointed to the residential market as being the hottest, saying, “Our traffic, searches and listing views exhibited the January ‘pop’ we saw last year, which made for a strong spring. In addition, a large number of prospective buyers have been telling us since the second half of 2015 that they plan to purchase in the spring and summer of 2016.” In effect, buyers and sellers have been doing their homework and getting ready to make their move this spring.
The Big Market Picture
Everyone, take a breath: we are returning to something that resembles normal. For the past fifteen years the real estate market has been one giant rollercoaster that has kept us guessing and stressing about what was going to come next. Now that the recession is starting to wane and new construction is growing at a steady, if slower pace, the market is becoming more balanced.
Of Groundhogs and Men
Yes, humans really do still alter their behavior based on the arbitrary weather predictions of a celebrity groundhog in Pennsylvania. Our friends at Realtor.com pulled weather data going back to 1921 and compared it against Punxsutawney Phil’s annual prediction of whether or not we would have six more weeks of winter or an early spring. After distilling the data, they found that if the housing market is strong (which it happens to be now), and Phil does not see his shadow (which was the case this year), the month of February experiences an 11% year-over-year increase in existing-homes sales. Rodents and numbers don’t lie.
So, Who’s Buying?
Millennials! Again. As the financial lives of 25 – 34 year olds improves, so does their buying power. In 2015 alone they represented nearly 2 million sales in the United States and this pattern is not expected to fade any time soon. Families, especially those of Millennials who have small children, start looking to buy and sell toward the end of the school year so as to schedule a move during the summer.
And don’t forget all of those retiring Baby Boomers. There is a lot of downsizing going on out there. That means homes are being listed that may need upgrading or all out renovating to appeal to the younger Millennial buyers. That’s fine for any buyer who will be happy to spend the summer working on their new home, but, for those who cannot be bothered with the hassle of renovation, there is still new construction. This leads us to…
Affordable New Construction: Give the People What They Want
New construction costs have been pushed higher than they should be due to limited labor, higher land costs, and concerns about the depth of demand. This expansion in price is predicted to taper off this year, which should lead to a decline in new-home prices. First-time home buyers are experiencing better access to credit, which makes them more appealing to builders who, in turn, are more willing to provide more affordable new construction homes. This is a relief for…
No Such Thing as Free Rent
Many first-time homebuyers will be inspired to purchase a home this spring based on the frighteningly high rent prices we are seeing across the country. At present rent prices are accelerating at a faster pace than home prices, leading many experts to point to the rental market as the new housing crisis. If it’s cheaper to buy than rent, and if the buyer can afford it, they are expected to do it. For those that cannot buy, the hope is that more affordable rental housing will be constructed.
What other trends are you seeing this spring? Tell us in the comments below!
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