Whats in store for the 2016 housing market?

#1 Where will Interest Rates Go?

The federal reserve decided to raise the overnight rate in December of 2015. This means that it just became a bit more expensive for the banks to lend you money. With that in mind, one would expect rates to have increased since this decision. In fact, the opposite is true. Due to the struggling stock market and oil prices rates have actually gone down. As of today (2/1/2016) rates are at about a 3.85% (4.0% APY) on a 30year fixed mortgage. Caompared to the historical average interest rate of 8.51%, we are very spoiled right now. We are hoping they stay under 4.5% for the rest of the year.

#2 What about home prices?

Every January Fannie Mae puts out a large housing forecast power point that we lenders use to get an estimate on the upcoming trends. According to this year’s report they estimate median home values to increase by 5%. That is great news for home sellers, but not necessarily for buyers. The good news is, if you sell your home for more and then buy your next home for more, it should all come out in the wash.

#3 Boomerang Buyers

One interesting group that may drive the market are the “boomerang buyers” — homeowners who lost their homes during the recession and are ready to jump back into the market. Some 7.3 million Americans lost their homes to foreclosures or short sales — two events that can stay on your credit report for up to seven years — from 2007 to 2014, according to real estate data company RealtyTrac. If they have no other major credit issues lingering, those first foreclosed owners are now coming out of the financial doghouse and qualify for a mortgage. RealtyTrac projects that 250,000 to 500,000 boomerang-ers will come back into the market this year, with another million or so more in the next few years.