Fed Rate Hike Will Not Sink Housing in 2016 Says Nationwide Economist

The housing market is healthy heading into 2016 and the widely anticipated Federal Reserve rate hike is not strong enough to sink it, said David Berson, chief economist at Nationwide. Although down modestly from its peak, the national Leading Index of Healthy Housing Markets (LIHHM) remains at a level well over the break-even of 100, according to Nationwide. This level suggests that the U.S. housing market is healthy with little chance of a housing downturn in the next year. Nevertheless, rapid house price appreciation is reducing affordability and is a risk to housing sustainability. 'There are parts of the country – certainly, California, New York, Washington D.C. and other markets such as Dallas and Denver - where house prices have moved up very high and we have some concerns about those markets,' said Berson. Regionally, the LIHHM performance rankings show that the housing markets in the vast majority of metropolitan statistical areas (MSAs) and divisions are in good shape. Berson said this suggests that most local housing markets should see sustainable expansion in the near term. That said, lower energy prices continue to weaken the outlook for regional housing markets with strong ties to the energy sector. The bottom 10 MSAs by LIHHM ranking are comprised almost entirely from Texas, Louisiana, Wyoming, and South Dakota, according to Nationwide.