6 Economists Forecast the 2016 Housing Market

by Tom Fine

Trends, forecasts and more from some of the most prominent economic minds in the industry

As we ring in a New Year, Housing News Report asked six prominent economists to forecast what 2016 will bring for the U.S. housing market.

For housing, 2015 was a strong year, with home sales high and home prices continuing to rise.

Overall, the economists surveyed were cautiously optimistic about 2016 when it comes to home prices, home sales, interest rates and the impact of loosening lending standards that have recently been introduced by government agencies. Since 2016 is a Presidential election year, the economists were cagey when it comes to regulatory changes to Fannie Mae and Freddie Mac.

Here’s what they are forecasting for 2016:

What will be the most important housing market trend(s) in 2016 and why?

Alex Villacorta, chief economist, Clear Capital: The two most important housing market trends to watch in 2016 will be the continued growth of rental rates and the moderating trend in home prices. The pattern seen in 2015 was largely characterized by a white-hot rental market, and if this continues, more households will likely choose to rent over buy in 2016.

In addition to driving rental prices up and vacancy rates down, this trend disengages an increasing proportion of potential home buyers — evidenced by the lowest homeownership rate in almost 50 years. Adding insult to injury for the purchase market, increasing rental rates continue to make it more difficult for potential buyers to save up for a down payment.

In 2016 we’ll use data from Clear Capital’s Home Data Index to see, at a local level, when the tide turns from rental to purchase demand. Many markets are already hospitable for buyers, but we have yet to see the demand. This implies that consumer confidence and the inability to overcome the barriers to purchase are a real headwind to a fully engaged housing market, especially for first-time home buyers.

As the year evolves we’ll be watching both rent and purchase trends closely, as a waning pattern in rental prices will suggest that momentum is shifting to the broader housing market, which should result in a more robust price growth in 2016.

A waning pattern in rental prices will suggest that momentum is shifting.

A headshot of Jonathan Smoke

Jonathan Smoke

Jonathan Smoke, chief economist, realtor.com:Demand for for-sale housing will grow and will continue to be dominated by older millennials, aged 25 to 34. This demographic has the potential to claim a third of home sales in 2016 and represent 2 million home purchases.

Two other demographics will also be dominant forces on the buy side but will also be a key part of providing the necessary inventory on the sell side. Gen-X is in prime earning years and thus is also experiencing improvements in their economic circumstances, which include more relocations and seeking better neighborhoods for their families. Older boomers are approaching — or already in — retirement and seeking to downsize or lock in a lower cost of living. Together, these two generations will provide much of the suburban inventory that millennials desire to start their own families.

Supply will also improve as a result of additional growth in new construction and particularly in more single-family construction. The growth will be in more affordable price points, which will help bring down the average new home prices and average size of new homes, which have grown dramatically so far in the recovery as builders principally focused on the move-up, luxury, and active adult segments.

Mortgage rates should also begin their long-anticipated ascent as the Federal Reserve attempts to “thread the needle” on influencing rates up without negatively impacting economic growth. The increases in mortgage rates will likely be lower than the increases in short-term interest rates created by Fed policy as global weakness and a strong dollar limit more pronounced movement in long bonds. Mortgage rates will also be volatile, moving up and down by day and week, similar to how we’ve seen the market in 2015, but the key difference will be a more pronounced longer trend towards higher rates.

New Home Sales & NAR Existing Home Sales - Jan05-Dec15

The move up in mortgage rates should be a net positive to the market as fence-sitting sellers and buyers begin to understand that rates are moving higher and decide to jump into the market while they remain at such historically low levels.

The final key trend is that rents will rise more rapidly than prices, adding to the already burdensome level of rents that exist in more than 85 percent of the markets in the country. In the near term, this reinforces the consumer’s decision to buy, but higher rents also start to negatively impact the pipeline for future purchases by keeping renting households from saving towards a down payment.

Where is the housing market headed in 2016?

Douglas Duncan, chief economist, Fannie Mae: Lots of discussion of the need for subsidy but the real problem is lack of income growth for low and moderate income households. There will be a discussion of the regulatory cost of land development which is an inhibitor to production of low to moderate income affordable housing. Rents will remain strong as a result.

A headshot of Matthew Gardner

Matthew Gardner

Matthew Gardner, chief economist, Windermere: I expect that we will see more homes for sale. Homeowner equity started to recover in 2013 and has been steadily improving since that time. As such, I expect that it will increase their likelihood of selling. At last — more inventory! But I fear that it will still fall short of the supply needed to match demand.

Mark Zandi, chief economist, Moody’s Analytics: The most important housing market trend in 2016 will be the developing housing shortage. New housing construction has picked up in recent years, but it remains well below that needed to meet demand from newly formed households, second home buyers, and obsolescence of the existing stock of homes. Rental and homeowner vacancy rates, which are already very low, will continue to decline. This will continue to push house prices and rents up quickly. The housing shortage will be most acute for lower prices and affordable housing.

Peter Muoio, chief economist, Ten-X: Wage growth will be the key new ingredient for the housing recovery. We have been watching signs of accelerating wage growth percolate through different data sources, but 2016 will see clear and convincing evidence of rising wages. This will help with housing affordability and be the final ingredient for higher household formations and housing demand.

Wage growth will be the key new ingredient for the housing recovery.

The other key 2016 trend will be the pace of interest rate increases. We know the Fed will pull the trigger, but the key question is how fast and strongly they continue to tighten in 2016, as that will affect mortgage rates.

This article was written by Daren Blomquist

Don’t Make Mistakes Selling Your Home

by Tom Fine

1. Not preparing to show your home in the right light. It’s critical to make sure when you are getting your home ready to sell that you put items in the right place. Don’t have too much clutter; arrange furniture so the rooms flow. If you don’t have the right furniture the best bet is to place staging in place of your furniture. Remember you are looking to get top dollar.

2.Doing a minor home improvement before selling might make sense.

If you have a ½ bath and have room to make it a ¾ bath to increase your selling price or a kitchen renovation to get more money, doesn’t that make sense? Yes! But don’t get carried away by doing too big of a renovation.

3. Not hiring an agent. So many people think they can do what an Agent/Broker can do. Are you willing to go through all the steps t get top dollar and then you don’t deal with an action in the right order or miss a timeframe that jeopardizes the deal, it’s critical that you have someone that can represent you to explain all the details. Studies have shown that hiring an Agent/Broker, you’ll get your money worth and it will eliminate a lot of headaches. Hire a professional to do a professional job.

4. Putting too high of a sale price. Wanting to get top dollar is everyone’s dream, but setting too high of a sale price can hurt in more than one way. It will keep the house on the market longer, the first two weeks is when your house sees a lot of action and people. When a house is on the market longer than a couple of weeks, then buyers believe they can get a bargain or low ball an offer. It’s key to get a BPO, (Brokers Price Opinion) this will provide an price with comps so you can make the right decision on the pricing.

5. Not hiring the right agent. You may have a friend or you see a truck that says “Use this truck for free when Moving, hire me” you get a postcard that says discounted fees or free staging. Do you want to think about discount people when selling your home? You want the right person and the one that thinks outside the box, has great opinions and options to sell your home.

6. Not exposing your home to the masses. When interviewing the agents, what is the agent going to do for marketing? Is she/he going to market to thousands of local agents, what about a Brokers open and open houses for the masses? Email marketing, Video tours on the Internet. Neighborhood mailer about the home. If the neighbors love the neighborhood, they’ll tell their friend about the great neighborhood, SOLD!

7. Putting restriction on the buyers, not letting buyers access the home. Some sellers, believe they know better than the agent, so they restrict the agent from showing the home, not allow agents market the home strategically. The right agents know how to go to market and know how to sell your home, let the professionals do their job.

8. Sellers should not be in the home while showing are happening. Several of my clients wanted to show the potential buyers their home, they felt they knew what to show buyers and they wanted to be there for the showings. This is a big No-No. Buyers and sellers should not be together, buyers want to feel free to talk about the house what they like and don’t like. They may want to do a remodel and the sellers can’t imagine why someone would want to change their home. The best scenario is to have the sellers out of the home during any showing and any open or brokers open. If they forget something, oh well they can come in after the showings. Believe you want top dollar, this will shoot them in the foot if they are there while a showing is going on.

These are the main items that can help get you on the right rack for positioning your home with the right agent, maximizing your return and getting maximum exposure. If you are in the Seattle and surrounding areas and you would like to discuss how we Tom Fine could help you, contact Tom today. Todays market is hot for sellers, positioning your home can potentially get more than market value. Have fun selling your home.

I love working with my clients!

by Tom Fine

November 5, 2014

To Whom it May Concern:

Tom Fine was our buyer’s agent for our recent home purchase in Green Lake, Seattle. We have decided to pen an unsolicited testimonial to his services.

Our family recently relocated from Australia to Seattle and decided to purchase a home. Luckily for us, we found Tom. Tom was able to explain the real estate market and buying and selling process in Seattle (which differs greatly from what we were used to in Australia). He was tireless in identifying properties that met our criteria and spent countless hours on the road with us explaining the positives and negatives of different localities, housing and building styles while viewing ‘open homes’. He was very flexible and understanding in his approach and his availability.

Tom’s knowledge gained as a building contractor was invaluable. He was able to walk through houses with us explaining potential benefits or pitfalls of the construction, layout, style, materials used and potential areas for improvement or maintenance. Several times he drew our attention to problems with construction that we would not otherwise have noticed.

In the end we found a house we wanted to make an offer for and Tom was able to calmly handle negotiations, helping to secure the house below the asking price in a highly competitive real estate market. He kept us in the loop every step of the way.

Subsequent to closing on the house, Tom has been happy to provide advice and expertise in relation to our plans to improve the property.

We’ve been impressed with Tom and would wholeheartedly recommend his services to others looking to buy or sell a home in Seattle.

Mark and Caroline Gordon
Green Lake, Seattle.

What Does Your Realtor Know?

by Tom Fine

When I go to purchase items whether it is a small item or large, I look to the salesperson to be knowledgeable about what they are selling, don’t you? So I turn the tables and say here are some questions to ask your Realtor.

What should you expect out of a Realtor?

Let’s discuss the knowledge items.

Your Realtor should have knowledge of the following:
➢ Of the area you are showing with information of schools, parks, and the neighborhood and surrounding neighborhoods
➢ About the structure, basic information, what kind of construction is the structure (Just because I know a lot about this subject I didn’t put this in here, but I expect a salesperson to know what they are selling at least the basic information)
➢ Thoroughly describe the features and benefits of the property
➢ Ability to inform the clients about the forms they are signing and the ability to get them any answer relating to the transaction
➢ Communicate consistently with all parties about updates, changes or modifications of the terms, contracts and schedules, not through text, but phone and email
➢ Ability to discuss the handling of earnest money
➢ What Escrow and Title is and why they are important
➢ Ability to negotiate for the best terms for their clients, know when to talk and when to walk
➢ Follow through, continuation of communicating about the status of the process
➢ Be able to provide their clients with CMA’s (Comparative Market Analysis) for price points of the house whether they are selling or buying, so the clients know what your house value is
➢ Knowing how to maximize your return on investment, preparing your property for sale
➢ Lowering his/her commission will not make the property sell faster, (A realtor should be able to respond to this question, why won’t my property sell faster with a lower commission, *larger dollar sales do have a lower commission structure)
➢ Realtor (Selling) provides you with preliminary costs to sell your home with several scenario’s for different selling prices
➢ Realtor (Buying) provides you closing cost scenario’s, (what it will cost you to purchase a home)
➢ Realtor provides you what the process is for selling or buying and what to expect from the beginning to the end

The items I have pointed out above are key reasons to use a Realtor; another key item is the Code of Ethics that Realtor’s commit to, to be a Realtor. Please note that if you have a license to sell real estate, this does not mean they are a Realtor.

To discuss how I can be of any assistance to you whether you are interested in buying or selling, please contact me, Tom Fine, Broker – Windermere Real Estate, tomfine@windermere.com or call me at 206-434-6561 and I will be glad to help you with your real estate needs. I work with individuals, couples or groups to buy and sell real estate in the state of Washington, from single-family homes, raw land, multifamily properties and investment properties.

Understanding Closing on your New Home

by Tom Fine

So you are going to buy a home and you hear the word Closing, Title, Escrow, what does this mean to you and how does it affect you and the buying or selling of a property. Closing is also known as the settlement, the settlement of the property you are buying or selling. The settlement includes the accounting of the funds transferred between the two parties by the closing firm also known as the Escrow firm.

The funding source (Buyers Lender) will transfer funds from the lender to Escrow and Escrow will settle all debts associated with the property, such as the sellers mortgage, any utilities, taxes, and insurance or outstanding debts of the sellers associated with the property. The balance after the payoff is known as the capitol gains to the sellers.

Escrow will also transfer the needed funds for the buyer for insurance and taxes.

Escrow is the firm in which typically handles the settlement of the funds, transferring of the funds and coordinating the signing of all the documents by the buyers and sellers. Escrow protects all parties involved by making sure that no funds or properties change hands until all conditions in the agreement have been met.

Title, which is very important establishes who actually owns/owned the property and tracts whom has owned the property over the years. Title must be free and clear, this will make it a marketable title and must be free of any encumbrances (A clouded Title). A clouded title is a property that is not a marketable title (such as an easement issue, a lien against the property, or an encroachment on the property are just a couple of issues that could cloud the title and make the property not have a clear title, therefore should not be transferred to anyone else. Title was set up hundreds of years ago, when travelers where coming across the country and they needed to be reassured that the land/property they where buying was their property. Title was a way to guarantee that the property that they where buying was theirs and not someone else’s.
California or Seattle. Closing is explained in-depth at http://www.homeclosing101.org/index.cfm
and explains what Title is, what Title Insurance is and why you should have Title Insurance.

What is escrow?

Escrow will also transfer the needed funds for the buyer for insurance and taxes.

Down Payment Assistance and Closing Costs Program Available Through WSHFC

by Tom Fine

A great chance for home buyers to take advantage of a State program that provides an opportunity to get down payment assistance and closing costs at a great interest rate of 0% sand deferred up to 30 years. Don’t miss this opportunity, contact Tom to see how to take advantage today and enjoy what the state is dishing out.