2016 Is A Good Year To Buy A Home

Dated: 12/30/2015

Views: 393

4 reasons 2016 is the year to buy a home

by Kathryn Vasel   @KathrynVaselDecember 4, 2015: 9:24 AM ET
Home sellers see biggest gains in eight years

If you've been on the fence about buying a home, 2016 is the year to take the plunge.

Mortgage rates have been bouncing around record lows for a while now. But even though they're likely to start going up, you haven't missed your chance to get a deal on a house.

A number of factors are coming together, making next year a good time to buy:

1. Home prices will finally calm down

Real estate values have been on the rise for a while, but are likely to slow their pace next year. Prices are expected to rise 3.5%, according to Zillow's Chief Economist Svenja Gudell.

Buyers who've been stuck behind the wave of rising prices may finally get the chance to jump in.

And that could lead to a flood of buyers, said Jonathan Smoke, chief economist at Realtor.com.

"We have the potential for about six million home sales just through the months of April through September; that is basically impossible to do," he said.

Related: These are the most expensive housing markets

But not everyone will be in a position to take advantage.

Despite the slowdown, Zillow still expects home values to outpace wage growth, which can make it tough to afford a home, especially for lower-income buyers.

Plus, prices in the country's hottest markets -- like San Francisco, Boston and New York City -- aren't expected to pull back as much next year.

2. More homes will hit the market

The slowdown in home prices will prompt more owners to list their homes, Smoke said, giving buyers more choice.

"Because of the price appreciation they have experienced, you will have more sellers put homes on the market next year," he said.

Related: How to buy a home without a 20% down payment

The new home market is also expected to grow in the coming year with builders focusing more on starter and middle-range homes, which will also boost inventory and make it easier for buyers.

With more homes on the market, bidding wars will become less common and prices could ease even more.

3. Dirt cheap mortgages could disappear

The Federal Reserve is widely expected to begin increasing interest rates soon, which means the window for record low mortgage rates is closing.

While rates are expected to go up gradually, higher rates push up borrowing costs and monthly mortgage payments.

"You are likely to get the best rate you will possibly see, perhaps in your lifetimes through the majority of next year, but certainly, the earlier the better," said Smoke.

4. Rents will still hurt

Rent prices are expected to continue to climb in the new year, which means in most cities, buying will be cheaper than renting.

Even though mortgages could get more expensive, buying might still be the better deal.

Interest rates would need to rise to around 6.5% for the cost of buying to equal that of renting on a national level, according to Ralph McLaughlin, housing economist at Trulia.

Related: Cities with biggest rent hikes

Find homes for sale
CNNMoney (New York)First published December 4, 2015: 9:24 AM ET
Blog author image

Michelle Cantrell

Michelle is a native of Southwest Missouri and has twenty-five years of experience in selling real estate in the greater Springfield area! Michelle specializes in all price points, including new const....

Want to Advertise on this Site?

Latest Blog Posts

3 Things To Do To Prepare To Buy Your First Home

3 Things to Do When Preparing to Buy Your First HomeDo you hope to be purchasing a home in the next year or two? It’s important to start preparing for your first home purchase as far in advance as

Read More

Thinking Of Selling Your House Now May Be The Right Time

Inventory is arguably the biggest challenge for buyers in today’s housing market. There are simply more buyers actively looking for homes to purchase than there are sellers selling them, so the

Read More

Questions To Ask When Buying New Construction

There’s nothing like moving into a home that is truly new, with no smells, smudges or dust left behind by a previous owner. Even better is when you get to make your own custom selections. But

Read More

Our Top First Time Home Buyer FAQs Answered

Purchasing a home for the first time can be just as exciting as intimidating. You may have many questions in regards to purchasing a home throughout the process. In this blog, you will find some of

Read More