A Freddie Mac housing prediction showed that 2016’s housing starts and home prices may reach their highest levels in a decade. The mortgage giant thinks 2016 will be such a booming year for real estate due to low mortgage rates, increasing job market, and steadily growing housing supply.
“Housing markets are poised for their best year in a decade,” says Sean Becketti, Freddie Mac’s chief economist. “In our latest forecast, total home sales, housing starts and home prices will reach their highest levels since 2006.”
The 30-year mortgage rate has averaged well below 4 percent for all of the year so far. Most recently, it was at 3.71 percent.
“Expect the 30-year mortgage rate to remain very attractive throughout the spring home-buying season, staying below 4 percent until the second half of the year,” according to Freddie Mac’s monthly Outlook for March.
While buyers have this low mortgage rate to take advantage of, sellers can look forward to rising home prices. Now that there are more housing starts and increase in supply, prices can raise.
“In 2015, house prices increased about 6 percent on a year-over-year basis,” Freddie notes in its outlook. “Expect house prices to continue to rise, but at a moderating pace, with annual price appreciation slowing to 4.8 percent in 2016.”
The unemployment rate continues to drop as well. It is currently below 5 percent, giving many more people buying power in the United States. Those with jobs are expected to continue to buy homes.
Despite better employment, wages remain a challenge. Freddie Mac says current wages are “anemic, barely keeping pace with inflation,” Freddie Mac officials caution. “If wages and incomes do not start rising, then rising interest rates, home prices, and rents will squeeze households and ultimately slow housing markets.”
Overall, the Freddie Mac housing prediction outlook is bright. They expect this momentum to remain into 2017.
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