Frustration. Confusion. Disappointment. With home prices in the U.S. rising an average of 17% over the last three years, many hopeful homeowners have had their hopes dashed by the strong housing market. Housing inventories have been low, and in many of the towns in our area, sellers have had the luxury of multiple bids.
There is a silver lining! The new year might be the perfect time to make that all-important move and buy a new home, because there are a few changes afoot that will benefit homebuyers. So, if you’re thinking of buying a home in 2016, here are 5 real estate trends to watch:
1. Home Prices Should Level Off
With the Federal Reserve’s recent interest rate hike and strong increases in home prices throughout our area over the last year, home values are expected grow at a slower rate in 2016 relative to 2015. According to Bank of America Merrill Lynch, home prices will likely rise an average of just 1% per year for the next 8 years. In some markets, home valuations will level off over the course of next year.
This financial backdrop sets the stage for a healthier market for homebuyers. Home prices won’t outpace homebuyer capital as quickly as previous years, and more people will be able to comfortably enter the market. If your 2016 to-do list involves looking for a new home, steady home prices are welcome news!
2. Millennials Are on the Move
You’ve heard of “millennials” —perhaps you are one—and they’re growing up and staking their claim on American life. A recent report by the National Association of Realtors notes that those aged 35 and under made up 32% of 2015 homebuyers, making millennials the largest generational group of new homeowners.
As young professionals achieve career stability, start families, and make long-term investments, they will become a powerful market force in real estate. For people in their 20s or 30s, now is a great time to consider buying a home. Homeowner equity can be an excellent investment as well.
3. The Rise of the 18-Hour City
Cities across the U.S. are teeming with people who are staying up later! Vibrant, all-hours hubs of city life, these cities are attracting young people, business owners, and investors to local real estate markets in the vicinity. According to the 2016 Emerging Trends in Real Estate report, such 18-hour cities will stay more affordable and become increasingly desirable due to the emergence of distinctive cultures and a slow-and-steady rise in real estate developments.
If an “18-hour” city sounds appealing, northern New Jersey is a great choice. Many towns in our area are less than an hour by train to New York City. The burgeoning nightlife and exciting restaurants in areas like Maplewood and South Orange make them up-and-coming 18-hour cities!
4. The Suburbs Are Calling
City living is expensive. Zillow reports that many big city renters who want more cost-effective living for their growing families are considering the purchase of a new home in the suburbs in 2016. With the draw of the “18-hour city,” access to public transportation, fabulous employment opportunities a short commute away, and shopping centers that cater to every need, the suburbs may be calling.
Northern New Jersey features cream-of-the-crop suburban living for a fraction of the cost of city life. Besides easy access to New York, there are “walkable” communities, excellent parks and seasonal activities, and a wide array of shops at destinations such as The Mall at Short Hills. These advantages are why so many people are considering a move to the suburbs.
5. Buying a Home is Still Cheaper than Renting
Renting an apartment is often that great middle ground between living with family or roommates and striking out on your own. Many renters are beginning to ask if the costs are worth it. Over the long term, renting is simply more expensive than owning a home. Trulia’s Rent vs. Buy calculator shows that across the U.S., with a 7-year average homeownership term and a 3.8% mortgage rate factored in, it’s about 28% cheaper to buy than rent. Those figures reach 35% near Boston and 51% in the Philadelphia metro region. Renting costs in general continue to soar and with low apartment inventories, many city dwellers are spending as much as 60% of their net monthly income on rent.
The financial benefits of homeownership over renting are compelling. With a house, a homeowner can build equity in property that’s in his/her name, and often pay much less in mortgage payments each month than renting. Homeownership also eliminates the risk of increasing rents with each renewal term.
Next year may be the opportune time to consider becoming a homeowner, and northern New Jersey is the perfect place to start your search. If you’re ready to have a look around, call Victoria Carter at (973) 220-3050, or email me at firstname.lastname@example.org. With almost 20 years of real estate experience in South Orange, Maplewood, West Orange, Summit, Millburn and Short Hills, I would love to assist you!