Even with headwinds facing the housing industry such as constrained inventory and home price appreciation outpacing wage growth, the National Association of Realtors (NAR) believes that 2016 will be the best year for existing-home sales since the pre-crisis year of 2006.
NAR Chief Economist Lawrence Yun, in presenting his midyear economic and housing forecast at the 2016 Realtors Legislative Meetings & Trade Expo on Thursday, said that even though existing-home sales were uneven in the first quarter, they are still ahead of last year’s overall annual pace (5.29 million compared to 5.26 million).
Yun also noted other factors that will help make 2016 the best year for existing-home sales in a decade, such as persistently strong demand, especially in the areas that have produced the most jobs, and mortgage rates near a three-year low. Also, since 2010, 14 million jobs have been created.
All this points to a forecast of an annual pace of 5.40 million for existing-home sales in 2016, which would be the best year since 2006 (6.48 million). Yun expects home price appreciation to moderate to between 4 and 5 percent after rising to 6.8 percent last year.
“The housing market continues to expand at a moderate pace in spite of the fact that home prices are rising too fast in some areas because of insufficient supply fueled by the grossly inadequate number of new single-family homes being constructed,” Yun said. “The good news is that pending sales in recent months have remained stable and should support a modest gain in home sales heading into the summer.”
Yun also noted that the absence of first-time buyers in the market was preventing a “full housing recovery,” despite conditions being ripe for homebuying such as strong job growth, soaring rents, and historically low mortgage rates. Factors keeping first-time buyers out include student loan debt, a lack of available starter homes, and prices appreciating amid flat wage growth.
“Spectacularly low mortgage rates mean today’s prospective homebuyers are the luckiest in a generation but the unluckiest in actually becoming homeowners because of the roadblocks hampering their ability to buy,” Yun said.
Senator Elizabeth Warren (D-Massachusetts) joined Yun onstage to talk about student loan debt and the obstacle it presents for younger would-be homebuyers. Warren cited data published by the NAR last year indicating that the first-time buyer share was at 32 percent, its lowest point in nearly three decades.
“Student debt is crushing young people, it’s hurting the nation's economy and delaying the opportunity for many to buy their first home,” Warren said. “Every monthly payment going to reducing their student debt could instead be money going toward saving for a down payment on a house.”
NAR will release its next existing-home sales on May 20 and the next pending home sales report on May 26.