Whether you are looking to buy or looking to sell, 2016 could be your year. Analysts predict that the potential real estate trends in 2016 will show moderate gains in sales prices and a continued growth in home sales. The state of Arizona also is expected to see job growth. That increase in jobs and housing sales, however, is expected to be slow and steady, which economists say is more favorable than a fluctuating market.
Nationally, with economic growth still rising, employment will continue to increase, meaning that people will have more money coming in and will be able to buy their first homes or upgrade to new ones, according to an article by Jonathan Smoke on Realtor.com.
In the article, Smoke explains that real estate trends in 2016 that will have the greatest impact on the housing market include a return to normal after 15 years of abnormal housing trends. Many predict that as millennials continue to buy their first homes, 2016 will be the best year to sell in the near future. He also says that builders will focus on more affordable price points and that higher mortgage rates will affect high-cost markets the most. Finally, costs for rentals are expected to go up higher than house prices; because more than 85 percent of U.S. markets have rents that exceed 30 percent of the income of renting households, it could be more affordable to buy in more than three-quarters of the country.
Sustained job growth throughout the country and improving credit conditions are expected to help keep commercial real estate activity expanding into 2016, but property prices are likely to slightly decrease after reaching their peak in some major markets, according to the National Association of Realtors.
Lawrence Yun, a chief economist with the NAR, says the outlook for the commercial real estate sector continues to look bright despite the multiple headwinds that have held back the economy in recent months. He said that the expected increases in lending and investment activity will be driven by steady job creation and slightly easier access to credit, according to the NAR news release.
Regionally, several states in the South and West have outperformed the rest of the country in job growth over the past year. Led by strong demand for apartments from faster household formation and rent growth, metro areas in those states are expected to see elevated levels of new construction, which will lead to a slight uptick in vacancy rates, according to the release.
Even though rising occupancy and rents will continue, property prices are forecast to decline slightly in 2016 as the Federal Reserve starts to raise interest rates. With cap rates already compressed to very low levels, Yun anticipated short-term rate increases for December, and then again in March, which could slightly temper market growth. However, investments are still expected to continue on an upward trend.
New home permits taken out by home builders for Phoenix-area construction were up almost 77 percent in October compared to a year ago and are up more than 46 percent this year versus 2014.
But the volume of new home sales, while up, is not at the same robust pace, according to the Phoenix Business Journal.
The idea that the housing market is steady yet cooling off in Arizona is good news for homebuyers because it means prices are not increasing as quickly.
Sales prices in Arizona have fluctuated up and down all year but have trended upward by late this year, according to the Arizona Association of Realtors.
The gains experienced in 2015 are setting the stage for continued advances in 2016, Lee McPheters, research professor and director of the JPMorgan Chase Economic Outlook Center at the W. P. Carey School of Business, said in a news release posted on the Arizona State University website.
“Relative to the majority of other states in the nation, Arizona’s economy will appear quite solid,” he says. “But compared to long term historical growth during past decades, the gains will be somewhat below average.”
Personal income in 2016 is projected to exceed 5 percent growth for the first time since 2011 as wages, employment, and population all continue to increase, according to the release. In 2016, Arizona is expected to be on track to finally replace all jobs lost during the recession.
“Though the 2.6 percent rate is below the long-term average of 4.2 percent, Arizona will likely emerge as one of the top 10 fastest for job creation in 2016,” McPheters said.
McPheters also estimated that population growth could go up from an anticipated 1.6 percent in 2015 to 1.7 percent next year. Though this is only half of the historical average for the state, the rate compares favorably with the nation and neighboring states.
Rebecca Grossman, president of the Scottsdale Realtor’s Association, recently told ABC 15 that slow and steady growth, just as the state of Arizona has been seeing, is ideal. She said the state has been avoiding volatility and an unstable market, which is beneficial. She also said that people are still moving to the state due to its hearty job market, but more construction is needed to meet the demand for housing.
You can still find available homes that are reasonably priced in our part of the Phoenix metro area, known as the West Valley, which includes the growing Verrado community as well as Buckeye, El Mirage, Glendale, Goodyear, Litchfield Park, Peoria, Surprise, Tolleson, Wickenburg and Youngtown.
For more information about real estate trends Arizona, visit the TK Luxury Group Blog.