The numbers are in. 2016 was the best year for the housing market since 2006. The housing market has faced a long road back to the pre-housing crisis sales numbers it enjoyed ten years ago. In 2016, 5.45 million existing homes were sold according to the National Association of REALTORS.
What is Behind the Strong 2016 Numbers
2016 is a continuation of a trend that has been steadily growing over the past several years. The presence of historically low mortgage rates for most of the year, combined with strong employment numbers gave many people the incentive to get into the housing market right away.
First-time home buyers made up 32% of all housing sales in 2016. This is down three percent from 2015. The number of existing home sales continued to increase even though housing prices also continued to rise throughout the year. It is likely that these higher prices kept some first-time home buyers out of the market and worked to keep sales numbers lower than they would have been if prices were more stable.
The numbers for 2016 are even more impressive when you realize that the number of existing-home sales in December were lower than expected. Experts have several different theories as to why numbers were down in December. Some feel that with the threat of looming increased mortgage rates, many buyers that normally would have waited for December, bought in November instead. They explain that November’s large leap in sales and December’s dip even out when the two months are considered together.
Others worry that December’s lower than expected numbers might be a sign of trouble in the housing market. December’s decrease of 2.8% over last year’s numbers was not a huge dip, but it still has some housing market watchers worried.
What’s Next for the Housing Market?
The biggest issue for the housing market continues to be supply. New home starts and completions were up in December of 2016, but they are still below the numbers the market is demanding. Economist Lawrence Yun notes that housing starts should be in the 1.5 to 1.6 million range, but instead are stuck at the same levels as during the recession.
The Federal Reserve has already signaled it plans to raise rates this year. Higher interest rates combined with escalating housing prices may put a strain on housing sales.
However, housing starts are finally trending up, for the first time in years. Even if mortgage rates do increase in 2017, rates will still be low by historical standards. Many buyers may still feel pressure to buy early in the year to avoid future rate hikes. Rate uncertainty may actually help the housing market in the short term. If housing starts can continue to grow, it may bring some stability to housing prices. The overall economic picture continues to show increased confidence and strong job numbers. These trends usually translate into more people buying houses. There are plenty of reasons to believe that 2017 should see sales of existing-homes continue to grow.
A Top Producing Agent for 2015 & 2016
Decker Bullock Sotheby’s International Realty
100 Tiburon Blvd, Mill Valley, CA.94941
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