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Top 5 Real Estate Predictions for 2016

The real estate market has been a whirlwind of changes in the past decade, and it’s sure to excite homeowners and renters alike throughout the next year. With employment rates projected to grow and new generations becoming self-sufficient, the real estate market is looking better than ever for investors and consumers alike. Whether you’re interested in new home construction, apartments, or mortgage pricing, you’ll find answers to your nagging real estate questions below as we follow the top real estate predictions for 2016.

1. Affordable Construction

The new year signals a new thought process in home construction—one that favors affordable products to appeal to younger homebuyers. Realtors note that as the cost of land rises and labor remains limited, the focus must shift to entry-level buyers and what they can afford. Additionally, with the millennial generation representing more and more sales—one-third of homebuyers in 2015—construction must be molded to fit their ideals and budget. Consumers are demanding smaller homes and more affordable homes, especially in large cities where the cost of living continues to rise.

2. Increasing Mortgage Rates

According to the Federal Reserve, mortgaging a home in 2016 will likely come at a slightly higher interest rate than in 2015. After a long history of low rates enjoyed by so many, an increase was inevitable. Who will be most affected by this? Those home markets with the highest pricing will feel the effects more than others, with around a 60-point increase in a 30-year-fixed-rate mortgage compared to 2015.

3. Rising Price of Rent

Don’t get too comfortable with your monthly rent right now because chances are it’s likely to go up when the time comes to renew your lease in 2016. According to a report by, 68% of property managers expect their rental rates to continue to rise throughout the year. What’s encouraging this trend? It’s likely due to the low number of vacancies experienced and the overflow of millennials into the rental market, making it easier than ever for property managers to stay in business even with exorbitant pricing.

4. Growth in Home Sales

The rental market may be overflowing, but that doesn’t equal a decrease in home sales. Quite the contrary—the World Property Journal predicts that “home prices will likely rise at a faster rate than inflation, but not the same rate as last year.” With a growing and improving economy, it’s no wonder people are quick to snatch up home sales. Financial security is on the rise nationally, which equates to the expected increase in home buying of 4-5 percent in 2016. Another reason for the sudden growth is the low percentage of unemployment, which means more people now have the resources to settle down and purchase their dream home.

5. Retiring Baby Boomers

Besides millennials, the largest demographic to change the housing market this year are the baby boomers. With many of them retiring, we can expect to see an increase in sales as they leave their old abode for something new and more efficient. This is motivated by higher interest rates, increased demand, and rising prices. Downsizing makes sense around retirement age, and since money may be tight, it’s the perfect time to sell pricey homes and possibly move to a better location.

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