Do signs point to another housing boom? Perhaps — home sales are poised to zoom to the highest levels since 2006 next year, according to a 2016 housing forecast issued by REALTOR.com.
Gains in new-home construction and existing home sales are both expected to push total home sales to the highest levels in years. The new-home construction market is expected to see the most gains in 2016, with REALTOR.com forecasting a 12 percent year-over-year increase in housing starts and a 16 percent year-over-year growth in new home sales. The gains in existing-home sales are expected to be more moderate, with expectations of a 3 percent year-over-year gain.
“Next year’s moderate gains in existing prices and sales, versus the accelerated growth we’ve seen in previous years, indicate that we are entering a normal, but healthy housing market,” says Jonathan Smoke, REALTOR.com’s chief economist. “The improvements we’ve seen over the last few years have enabled a recovery in the existing-home market, but we still need to make up ground in new construction, which we could begin to see in 2016. New home sales and starts will bring overall sales to levels we have not seen since 2006 and will help set the stage for a healthy new home market.”
Total sales for existing and new homes are expected to reach 6 million for the first time since 2006 next year.
2016’s Buying Force
Fueling the increase in total sales, REALTOR.com predicts three distinct segments of home buyers to dominate: older millennials (25 to 34 years old); younger Generation Xers (35 to 44 years old), and retirees (65 to 74 years old), Smoke says.
Millennials are expected to make up the largest advanced notice demographic of buyers in the coming year at 30 percent of the existing home market. “Driven by increasing income, millennials will seek out homes that meet the needs of their growing families – putting the most weight on the safety of the neighborhood and the quality of the home,” according to REALTOR.com’s forecast. “Commute time and a preference for older homes have these buyers looking in city centers and closer-in suburbs.”
Young Generation Xers:
Buyers between the ages of 35 to 44 years old are likely to make up the second largest population of buyers in 2016. “These buyers have rebounded from the financial crisis and are entering their prime family-raising and earning years,” REALTOR.com’s report notes. “More than two-thirds of the buyers in this age group already own a home. They will be moving out of a starter home into a larger home or a more desirable neighborhood.” The markets expected to see the most upticks from these growing families are: 1. Atlanta-Sandy Springs-Roswell, Ga. 2. Denver-Aurora-Lakewood, Colo.
The third largest segment of home buyers in 2016 are expected to be individuals or couples who are looking to relocate or retire between the ages of 65 and 74. New retirees are expected to fuel a trend in downsizing and seeking out ways to lower their cost of living. “They will likely put their home up for sale at the start of the home-buying season in March or April, and aim to make a home purchase following the sale of their home,” REALTOR.com®’s report notes. “This age cohort has a very strong preference for newly constructed homes and put the most weight on their ability to customize their home.”
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