Is 2016 the year you will act on your dreams and buy a home of your own? This year is going to be different than ones in the past, and upcoming trends can affect prospective homeowners in some dramatic ways. A few things to look out for:
1. Interest rates are going up.
Interest rates held steady at record lows for a decade. But, the Fed raised a key interest rate in mid-December and they expect to make four more increases this year. This is going to mean higher interest rates for borrowers, as well.
To insure the very best interest rate possible, make sure you improve your credit before applying for a loan. Make sure that any entries on your credit report that could drag down your score are dealt with. A difference of even 1% can add up to tens of thousands extra over the life of your loan.
2. More renters looking to buy.
Rental prices are expected to increase by eight percent on average in 2016. Since buying a home is already cheaper in most markets, increases could be enough to encourage some renters to make the jump and buy a home instead. If enough people make the switch, it can increase competition significantly.
3. Millennials (maybe) entering the market.
Consumers between 18 and 34 continue to confound industry experts. On average, they are less likely to want to buy homes than previous generations were at the same age. However, a recent survey shows that 13% of Millennials plan to buy a home within the next year and 35% say they’d like to buy by 2018. Since Millennials are the largest consumer cohort in the country, increased competition from this group can mean that it’s harder to find a home to buy.
4. Better prices.
Despite the pressures listed above, home prices are expected to go up more slowly than they did last year. In 2015, housing prices went up over 6%, but are expected to go up just 3 to 5% this year.
This smaller increase can help balance some of the pain of higher interest rates on mortgages. But, some industry experts think that the lower prices may make some people who may have decided to sell to stay where they are and invest in their current homes instead.
Each year brings a different set of challenges to prospective home buyers. But, by keeping up on the trends and building the strong foundation you need to qualify for a great deal on a mortgage, you can be ahead of the game. Talk to us now about how we can help you get ready for home ownership in 2016.