More than seven years after one of the worst recessions in American history, the U.S. housing market appears to be on firm ground again. Despite some hiccups, it is likely that it will carry the momentum it gained this year into next.
In fact, the prospects are better than the average consumer probably thinks. In October, an index of home builder confidence at the National Association of Home Builders reached a 10-year high.
The huge millennial population is going to be buying more homes. So-called boomerang buyers who lost their homes in the Great Recession are returning and the conditions for attaining a decent mortgage and a home at a reasonable price look solid.
Here are a few predictions for the housing market in 2016.
1. Millennials Coming Of Age
The consensus among experts has been that millennials would stimulate the housing sector. A majority of those born roughly 30 years ago are starting to realize their financial aspirations, and simultaneously entering their peak homebuyer age.
According to the National Association of Realtors (NAR), millennials are the largest population of buyers for the second consecutive year. They make up about one in three buyers. It makes sense that their entrance into the housing market will provide a boost.
To be sure, many millennials remain cautious about making big investments. As is the case with other groups, they were chastened by the declines of the Great Recession.
However, this group also represents untapped potential. The millennial home-buying momentum should pick up. Expect millennials to make up a greater share of buyers and to boost the home-buying market.
2. Boomerang Buyers To Make Their Return
Millennials were not the only population impacted by the latest recession. An estimated seven million Americans were believed to have lost their homes to foreclosure over the same period. The loss of equity resulting from the downturn, in addition to a weakened job market, made it increasingly difficult for homeowners to meet their mortgage obligations.
Many of them became renters, forgotten by institutional lenders who are hesitant to lend to individuals who had a foreclosure on their records. Over the past seven years, a number of these formerly distressed homeowners have been able to recover and represent reasonable credit risks.
The National Association of Realtors (NAR) says that about 950,000 formerly distressed homeowners are looking to buy again. Over the next five years, an additional 1.5 million formerly distressed homeowners are expected to actively participate in the housing industry. These boomerang buyers should be a boon to the housing industry.
"The deep wounds inflicted on the housing market during the downturn are finally beginning to heal as distressed sales continue to decline and home prices in some parts of the country have bounced back to their near-peak levels," said Lawrence Yun, chief economist at the NAR. "Borrowers with restored credit will likely have the ability and desire to own again, encouraged by the long-term benefits homeownership provides in a stronger economy and more stable job market."