Real Estate Expectations for 2016

2016 Real Estate Expectations

2016 expectations for real estate include higher interest rates, more online property shopping, fewer users of online home pricing tools, record years for some markets, and a continuous market growth if government relaxes real estate rules and if property values continuously increase.

Interest rates should increase slightly

California-based realty research group, RealtyTrac, vice president, Daren Blomquist said, "Affordability is going to be a much bigger hindrance going into 2016." The Federal Reserve anticipated a rise in interest rates as the economy is finally producing jobs. The increase in interest rates will also increase the cost of credit for home buyers, affecting all types of real estate transactions.

According to Blomquist, almost 3% of about 600 counties monitored by his firm in the U.S. are having "unaffordable" home prices for average income earners. He said that if interest rates and home prices rise while wages rise only a little, the 3% of unaffordable market will be expected to increase to about 25%, and home price appreciation will be expected to become stagnant. Moreover, a 5% rise in interest rates will definitely result to in a sudden upsurge of unaffordable markets.

Based on the prediction of, prices in housing will rise at an average of 3% this 2016.Source:


Online real estate shopping continues to grow

In 2015, Millenials emerged as the top buyers in real estate, and the trend will continue to grow in 2016 considering the improved financial conditions. Buyers between ages 25 and 34 opt to purchase properties online.

In India, for example, the internet influenced a $43 bn worth of real estate transactions in 2014 that is based on a study conducted by Google. $31 bn of which is for residential properties and the rest is for commercial. The study revealed that 74% of research about real estate focuses on buying residential properties while the remaining 26% focuses on renting residences.

According to Google, real estate queries are consistently growing and the organized real estate market in India is expected to double by 2017.


People may get fed up with online real estate estimates of value

Pricing a home is one of the most difficult tasks of real estate agents. Online real estate estimates of value were created to "hopefully" make the job easier. These online tools use "automated valuation model" or AVM and can be found on sites such as Zillow. These tools use very sophisticated algorithms from publicly available sources of information to predict the current market value estimates of homes and present them in a user-friendly interface.

Although they seem helpful at first glance, but the problem is they might not present accuracy and consistency in their predicted market value of properties. Zillow, for one, is an example and its "zestimates" are often 10% percent or more off target.  In certain markets, the home valuation could be off by as much as 40%.  At the end of the day, for your most accurate valuation of your home, you should speak with a local real estate agent.

These online estimate sites should expect a decline of users in 2016.


Some markets have seen record years

2015 marked a record year for real estate markets in numerous cities including Toronto and Vancouver in Canada, and Chicago and Texas in the U.S. The record is expected to continue in 2016 and might be even better.

1. The Toronto Real Estate Board expects another record year for home sales this year, depending on the borrowing costs and property listings availability direction. 2. Chicago, on the other hand, expects global investments to continue to increase in 2016 despite possible depression on energy prices and slowdown of the Chinese economy.

3. In the U.S., which is the largest real estate market in the world by far, the outlook for 2016 is positive. About 64% of respondents in a survey by the Association of Foreign Investors in Real Estate plan to make moderate or major increases in their real estate investments this year, while nobody plans to decrease investments.


Continued growth requires government won't make counter-productive rules

In 2015, the governments of India and Japan relaxed some of their rules for foreign real estate investment and internet-based residential leasing, respectively.

1. The government of India presented Real Estate Investment Trusts (REIT) to allow foreign investments in the country's property sector and help reduce the debts of the developers. But some barriers are yet preventing the flow of actual investments. One is the existing Foreign Exchange Management Act (FEMA), which governs India's cross-border transactions. Should the REIT be finally approved this year, foreign investment flow in India will be allowed to the rent-yielding real estate projects which are already completed.

2.  In Japan, the Ministry of Land Infrastructure Transport and Tourism (MLIT) started to allow real estate agencies to use the internet and videophones in disclosing to potential clients. The government of Japan aims to make pre-disclosure meeting easier and increase liquidity in their market. They call such move as the Explanation of Important Matters. In the meantime, it runs as a trial to contracts in residential leasing, but by 2017, it's expected to be implemented to all internet-based pre-disclosure meetings in real estate.

With the governments' relaxing of rules, 2016 is expected to be a more booming year for real estate industry.

Property values should continue to increase making, real estate a good value

1. According to a research made by Members Equity (ME) Bank through DBM Consultants, property values, particularly in residential properties, are set to keep rising in 2016. The current number of property buyers is greater than the number of people selling their homes, thus the real estate market will keep a good value. This demand for property may remain strong while interest rates are still low and there is a strong labor market.

2.  UK homeowners, in particular, have seen the value of their properties rise in 2016, and the increase in property value across UK is expected to continue. House prices are forecasted to rise to up to 8% in some parts of UK while the sales in residential properties will also increase.

3. While residential properties have a very promising 2016, commercial property values, on the other hand, might drift lower this year based on the Green Street's Commercial Property Price Forecast.

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