To say the housing market has seen a few ups and downs over the past decade would be an understatement at best. Even with a couple of good solid years under the belt in 2014 and 2015, many people are still feeling a little uncertain when it comes to the 2016 housing market. Some potential investors are questioning whether the momentum can continue in 2016 and if this could be a good year to finally get off the fence and enter the real estate investing market.
According to several key indicators, 2016 shows signs of being a great year to invest in residential real estate. Here is a look at some of the top predictions for the housing market in 2016.
1. Home Values Will Increase
The World Property Journal predicts home prices will likely continue to rise in 2016 and at a higher rate than inflation. This is certainly great news for real estate investors. As property values increase further, investors will build up more equity in their investment properties. 2016 could also be a great year to start a remodeling project to either flip or hold for the long term. A good remodel could add an incredible amount of value, enabling you to flip the property for a nice profit or hold onto for a steady long-term investment with good cash flow.
2. Rents Will Go Up
It’s no secret that rents have been on the rise for the past few years, and real estate investors will be pleased to hear that this trend is expected to continue in 2016. Due to the high cost of living in many urban areas such as Los Angeles, Boston and Seattle, renting may be the only plausible option for many local residents. Rental rates should continue to rise faster than the price of homes, which is a good prediction for an even better cash flow on investment properties.
3. Millennials Will Buy
The Millennial generation is beginning to thrive and grow further into adulthood, with more financial security than ever before. In 2015, they represented one-third of homebuyers, and that number is predicted to rise even further in 2016. Millennials tend to prefer smaller, newer and more affordable homes, especially in larger cities.
4. Baby Boomers Will Make Their Impact
Baby Boomers are retiring in record numbers, leaving many options open for those seeking to invest in real estate. Baby Boomers tend to prefer more tropical areas, and many flock to active adult communities where they can mingle with other people of their generation. They usually prefer to live in smaller but more custom homes with spacious single-level living, and they often don’t mind renting for a time as they explore different parts of the country trying to find their ideal place to settle down and live out their retirement years.
5. Suburban Sales Will Take Over
Inventory in cities is fairly low, says Zillow’s chief economist, Dr. Svenja Gudell. Gudell predicts a rise in the sale of homes in suburban areas as homebuyers seek an area with nearby amenities, a sense of community and a price that doesn’t induce sticker shock. Homes in a nice suburban neighborhood with nearby shopping, good schools and low crime rates would make for a great long-term investment property right now.
6. Interest Rates Will Rise Slowly
The first interest rate hike in the United States in nearly a decade took place in December 2015, and according to the Federal Reserve, interest rates will likely continue to inch up slowly throughout 2016. So, if you haven’t purchased your investment property yet, now is the time. Make a smart choice and lock in your long-term interest rate now before interest rates rise again.
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