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Economic Uncertainty Is Not Dampening Housing for 2016, So Far

house-for-saleYear-over-year trends indicate that housing will have its best spring season in 2016 since 2006 despite the economic turmoil in financial markets, which includes a paltry GDP growth rate of 0.7 percent in the advance Q4 2015 estimate released last week.

According to Realtor.com’s First Look at the preliminary January data for housing, the pent-up demand that was behind housing’s growth in 2015 will continue on into 2016 to make this spring the best season for housing in a decade.

“Our initial readings on January affirm the positive growth we expect to see in the residential real estate market in 2016,” Realtor.com Chief Economist Jonathan Smoke said. “Our traffic, searches, and listing views exhibited the January ‘pop’ we saw last year, which made for a strong spring. In addition, a large number of prospective buyers have been telling us since the second half of 2015 that they plan to purchase in the spring and summer of 2016.”

According to Realtor.com, residential housing has followed a pattern typical of January, which includes slower demand, lower inventory, and slower market velocity. However, the first month of 2016 was marked with robust year-over-year growth in housing, including an 8 percent increase in median list price (up to $227,000) and a 4 percent increase in the rate at which homes are selling at 100 days on the market. Yearly inventory stood at about 1.5 million at the end of January following a seasonal decline.

“All indicators point to this spring being the busiest since 2006.”

Jonathan Smoke, Realtor.com Chief Economist

“All indicators point to this spring being the busiest since 2006, but we’ll need to see inventory grow more robustly this year to satisfy these buyers,” Smoke said. “The decline in the stock market so far seems to be a net positive for real estate demand. Fixed 30-year mortgage rates are now about 25 basis points lower than at the end of 2015 as a result of the financial market weakness. That extra buying power appears to be offsetting any weakness from buyers whose stock-related losses impair their ability to buy.”

The soft economic growth to end 2015, which was caused by lower oil prices, can eventually turn into a positive for consumers and for housing, according to Trulia Chief Economist Ralph McLaughlin.

“Much of the slow growth in GDP was due to energy firms pulling back because of lower oil prices. So it is probably most likely to have an effect on oil-dependent markets such as Houston, Dallas, and the Dakotas,” McLaughlin said. “The flip side of lower oil prices is that consumers end up having more money in their pockets at the end of the day. While a temporary drop in oil prices doesn’t help consumers that much, a long-term sustained drop in oil prices will. We’ve seen oil prices drop considerably in the last year and a half, which shows that it may be more of the new norm when it comes to gas or oil prices instead of a temporary blip. That’s actually good news for homebuilders and for existing homeowners because households are theoretically able to save more, and part of their savings may be devoted to a down payment on a home, or taking care of maintenance on their existing home.”

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.

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