New American Funding Blog

Trends that will affect real estate in 2016 - Part 2

By Courtney Lynch   |  February 24, 2016

Urban gardens are becoming a popular trend.At the beginning of every year, people in the real estate industry wonder what changes are in store. Lists of the hottest metro areas are compiled and people look at trends to try to predict consumer movements.

This year, there are many factors affecting the real estate market. The Federal Reserve's recent decision to raise interest rates for the first time since 2006 has many people wondering how it will affect mortgage rates and, consequently, home sales. Changes to lending practices through the TILA-RESPA Integrated Disclosure rule are sure to bring about additional changes both industry professionals and homebuyers will feel.

Meanwhile, changes in the homebuying demographic bring about developments in preferences. As millennials begin to account for more home sales and the market becomes increasingly more diverse, real estate agents will need to adjust to a changing landscape.

Selling season

Many people know the selling season as the period of time starting in spring and lasting through summer. Homebuying tends to peak in June and slow down once the weather starts to cool off. However, several things could impact the traditional selling season this year.

The slight uptick in interest rates in December is expected to be the first of four, which will be carried out over the course of the next year. The first one may have sparked some homeowners to sell sooner rather than later, the National Association of Realtors stated [1].

"...The prospect of higher mortgage rates in coming months and warm November and December weather allowed more homes to close before the end of the year," Lawrence Yun, NAR's chief economist, said in a press release.

This sentiment could carry over into the new year, as people attempt to get a mortgage at a low rate before they begin to increase significantly.

As mentioned by Yun, the unseasonably warm November and December allowed the selling season to last longer in 2015 than in other years. However, a snow storm that burdened much of the east coast has brought the cold days of winter. The Washington Post noted that the beginning of the selling season is usually linked to the weather [2]. If the weather warms up quickly, real estate professionals may see an increase in business earlier in the year. However, if the snow sticks around, an early start to the season seems unlikely.

Food

A major point many people consider when looking at housing options is its location and what amenities are nearby. Many of today's homebuyers are looking for walkable communities, where they are able to fulfil their daily needs, like grocery shopping, without traveling very far. Additionally, as more Americans are becoming more health-conscious and valuing organic and fresh produce, shopping preferences have changed. According to Zillow's CEO Spencer Rascoff, prices for homes located near Whole Foods and Trader Joe's went up 140 percent last year, CBS News reported [3]. This is twice the increase of the average home, which increase 70 percent on average. Meanwhile, homes located near a Starbucks increased in price by 100 percent.

The Emerging Trends in Real Estate 2016 report from PwC showed a different finding on a similar trend [4]. The report pointed out that many homebuyers are looking to live in urban areas, but also want to eat fresh food. In an environment that isn't conducive to growing mass amounts of fresh produce, many urbanites have begun to come up with creative solutions. Urban farming has become a trend embraced by many desiring fresh foods. Plus, the practice's utilization of rooftops has made a once-obsolete space not only functional, but sought-after.

Home prices

In 2015, we watched as home prices continued to rise, driven by growing demand and insufficient supply. In a press release, Yun predicted the trend to continue in 2016 [5].

Realtor.com echoed these sentiments, stating in a press release that home prices will continue to rise, but at a lower rate than they did in 2015 [6]. The increase will be hindered by fewer people being able to afford homes, higher mortgage rates and more strict credit standards.

However, as more contractors begin to build homes at lower price points, the market should see an increase in affordable inventory.


[1]. National Association of Realtors
[2]. The Washington Post
[3]. CBS News
[4]. PwC
[5]. National Association of Realtors
[6]. Realtor.com

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