As we begin 2016 and reflect on the last 12 months, we would ultimately characterize 2015 as having been a very solid year for housing. Early year-end numbers indicate that year-over-year sales nationally are up by about 10%, equating to roughly 5.3 to 5.4 million units of inventory (and compared to about 4.9 million in 2014). The strong spring selling season in 2015 was indicative of the market’s overall strength, even while luxury sales activity appeared to have slowed slightly over the course of the last four months. Furthermore, as has been evident in the wake of the Fed’s December announcement, the long-anticipated interest rate increase is not predicted to have a large impact on home-buying activity in the year to come.
Locally, we saw a nearly flat year. HOME Real Estate closed 2,900 total units, compared with 2,875 in 2014. However, the company’s closed volume is up 13 percent year over year, which bodes favorably for average sales price. The luxury market, defined as homes $400,000 and up in the Lincoln market, was down in 2015 overall.
- 2016 will be a continuation of the housing market’s recovery: This will not be a “boom” or a “bust” year, but a “normal” one with reasonable expectations.
- Millennials forming new households: This key segment of the consumer population has largely delayed purchasing homes; however, we are starting to see a shift from rentals to ownership among the demographic … and we expect 2016 to be a “break-out year” for these buyers.
- Washington recognizes the need for affordability: We are seeing a move toward more normalized credit standards versus more risk-averse standards, essentially giving more qualified buyers the opportunity to own a home. The banks, Fannie Mae and Freddie Mac have furthermore seen fewer foreclosures in the recent year, and we expect that trend to continue in 2016.
- Boomerang buyers bounce back: Homeownership continues to be a very important dream among American consumers. While a number of people weathered the hardships of short-sales or foreclosures in the downturn, over the last five years, we have seen a gradual return of these buyers to the marketplace – another indication that the market has been successfully working through prior challenges. People who may have been forced into rentals are now re-entering the market with home purchases.
- By that same token, even with the dollar strengthening against other global economies, the American housing market will maintain its standing as a very safe place to park assets.
All that said, as the recovery continues and the strength of the industry grows, 2016 will be another important year for housing and its steady move toward normalcy.