Statistics suggest that weight-based resolutions will be the most popular goal made by Americans as they enter 2016, but millions will face a less publicized quandary: Where will I live during 2016, and in the years after?
Those who don’t already own a home (around 40 percent of the population, according to census.gov) must weigh the pros and cons…is renting still the most salient option, or is this year the one where we finally make the jump to homeownership?
There are always a bevy of personal elements (existing loans, likelihood of remaining in the area) that change the outlook for individuals. There are a number of factors, however, that will make buying 2016 an attractive year for potential homebuyers. Here’s a rundown of the major movements that will push those on the fence into their own, newly-purchased yard.
The obvious, if misrepresented, argument against buying a home now is that real estate prices are on the rise. Check the national numbers and you’ll see costs have gone up 13.3 percent since 2012.
That’s significant, but consider it within a greater context. Housing prices traditionally go through years of rises and falls. For example, the last prolonged streak of rising prices occurred from 2000 to 2006, during which the cost of owning a home increased by 55 percent. Compared to that build-up, 13.3 percent doesn’t seem so bad at all. Consider today’s prices against the highest numbers during 2006, and buyers will find that property prices in 2015 are actually down 20.8 percent.
Buyers don’t need to just consider the relative merits of buying in 2016. Svenja Gudell, the chief economist at Zillow, predicts the rise in housing prices to amount to a mere 3.5 percent next year. That sort of easing should pressure buyers to take action sooner than later.
Don’t just take our word for it. Jonathan Smoke, the chief economist at Realtor.com, sees the potential for up to 6 million home sales from April to September. What sort of odds would you normally give that sort of phenomenon, Jon?
“That is basically impossible to do,” he said, marvelling at his own prediction.
The sudden rush of interest that the slowing price increase will generate will also have a positive impact on the flip-side of the issue: More Americans will put their homes on the market.
First-time buyers won’t be the only ones taking advantage of the good news. Repeat homebuyers have been in decline, especially in high cost areas, but the slowing price increase may push many who have been holding onto a property to put in on the market and explore newer, better options.
A combination of more buyers and more sellers means a decrease in bidding wars, and lower costs all-around.
Fannie Mae updated its Desktop Underwriter to version 9.3 on December 12th, bringing with it a new slew of options to make homeownership more realistic for first-time buyers and those with lower income or fair credit.
The biggest change is the introduction of the HomeReady Mortgage program, an option that removes limits on borrower contributions to down payments and closing costs, as well as offering more assistance to applicants with lower credit.
Other changes, spread more generally across Fannie Mae, make regulations more flexible with regards to self-employment income reporting, non-occupant borrowers and high-balance loan requirements.
The new regulations will increase eligibility for mortgages and could boost homeownership accordingly.
One of the more obvious reasons to jump during 2016: Federal Interest rates are expected to rise in 2016. There’s no date set for a change, but it’s safe to say that sooner is better than later for those looking to buy.
Buyers shouldn’t let the Fed force their hands, however. Perhaps rates will be optimal, but that doesn’t mean that a renter should be sprinting to get the best deal. Credit impacted by recent car purchases or existing debt may provide a reasonable filter for whether someone wants to pursue a new home during 2016. Granted, the points listed above make next year one of the best in recent memory for those with fair credit to look into purchasing a home.
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