2015 was a great year for real estate growth and market improvement! We saw a 13% increase in new home sales and a 7% increase in existing home sales. Solid job creation (210,000 jobs per month on average through November) supported more first time home buyers and also more relocation throughout the country. Additionally, we saw less distressed sales, second home purchases, and investor purchases in 2015. And, home prices rose 7%, allowing for substantial gains in equity across the nation. All indications show that the housing market has almost completely recovered!
Appreciation was well over normal due to a supply and demand imbalance that favored sellers. This scenario, created by low inventory levels, continues to characterize the market as we go into 2016. And lack of available homes for potential buyers plays a part in our slightly slowing market. Another factor influencing the slowdown is new construction consisting of more apartments instead of single family homes. This is creating an influx of new households made up of renters and rents are rising faster than home prices. It's cheaper to buy than rent in 75% of the country. Adversely, this may cause a future problem when renters are paying so much for housing that they cannot save to purchase a home of their own.
Mortgage rates only increased by a small margin due to economic weakness in Asia and Europe, unrest in the Middle East and nervous investors in the stock market. Though rates may increase in 2016, they will likely remain low in comparison to historical rates. Credit access was tight last year and remains so. However, this is being eased by more low-down payment mortgage products and lower insurance premiums on FHA loans. The down side is that the economic crisis we are rebounding from has left average credit scores lower than lenders would like to approve.
Nationally, the housing market is definitely stronger than it was even one year ago. In 2016, we need new construction of affordable single family houses to combat high rental rates and expanded credit access for people who can afford to buy. Locally, our inventory shortage continues to drive home appreciation upwards. In Nov 2015 the home listing pie looked like this:
- 62% Existing home sellers
- 14% New construction to be built
- 11% New construction completed
- 9% Under Construction
- 3% Short Sales
- 1% Foreclosures
These factors point to a promising year for sellers in 2016 and a relatively good year for buyers in the market as well!