With 2015 in the record books, it’s time to focus forward. While it’s a given that no one has the ability to predict the future, it is possible to paint some broad strokes based on past and current events. Here is our stab at the Top Ten things you can expect to affect the Bay Area Real Estate Market in 2016:
- Expect interest rate hikes to continue.
Our first interest rate increase in almost a decade took place in Q4, 2015 as the Fed took one more step in its ongoing quest to normalize U.S. monetary policy. While we can expect to see more increases coming in 2016, we do not believe they will do much to hamper the Bay Area housing market short term, as their effect on mortgage rates will not really be felt for some time to come.
- Expect continued stock market volatility.
Stock prices ended down for 2015 as we experienced an extremely volatile year. Leading issues included
turmoil in the Chinese and European markets, anticipated interest rate hikes, the collapse of oil prices and the stated intent of the Fed to begin normalization of the U.S. monetary policy. Since none of these issues have gone away, expect more of the same, bringing continued uncertainty to the stock market, which in turn will bring a degree of hesitancy to the housing market.
- Expect millennials to continue avoiding homeownership.
Only 20% of millennials own a home versus 75% of boomers. Millennials are staying home longer, getting married older (if at all) and having children later. Consequently, they appear to be in no rush to buy homes. It had been anticipated that they would begin moving en-masse towards purchasing homes in 2015 – this never happened and will probably not become a reality in 2016 either.
- Expect move-up buyers to continue to have extreme difficulty.
The “move-up” segment of the market has almost disappeared as there have been no homes for them to buy to replace their existing properties. While homeowners have historically moved an average of every seven years, a series of factors over the past five years have now increased that average to ten years. Since move-up buyers have traditionally represented a large percentage of the buying population, the fact that they are going nowhere will leave a big gap in the market for 2016.
Next week – Top 10 Bay Area Real Estate Predictions for 2016 – Part 2
Carl Medford is a licensed Realtor with Keller Williams Realty and a licensed general contractor. This article is sponsored by the Central County Marketing Association at www.ccmgtoday.com.
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