2016: A Second Good Year for Housing
The housing market picked up last year in many areas of the U.S. Look for it to grow as well or better this year.
The housing market is poised for a solid year. In fact, it’s shaping up to be slightly better than 2015, when many parts of the U.S. saw housing perk up.
More potential buyers are seeking mortgages this year as they see their paychecks swell a bit in a strengthening job market that’s forcing up wages. Stronger household formation and continuing low mortgage rates will also spur buyers. Growth in households, moreover, is fueling a clamor for apartments in metro areas, and vacancy rates have fallen to 22-year lows.
Builders will scramble to keep up with demand for housing of all types. Inventories of new homes are especially tight. Construction is constrained by, among other things, a big shortage of skilled home construction workers. The need for new homes will increase as sales of existing homes rise — homes sold by downsizing baby boomers as well as by buyers looking to move up. But some builders will continue to focus on putting up multifamily homes — the quickest way to expand inventory and make more efficient use of workers.
Housing markets overall will be strongest in the West and in the South, where they are boosted by strong population growth stemming in part from strong in-migration from the Northeast and Midwest. Note that home prices are rising at near-double-digit rates in San Francisco, Denver, Portland, Ore., Seattle and Dallas. Price growth is strong in smaller metros as well — places such as Salt Lake City, Boise, Idaho, Reno, Nevada and much of the Florida peninsula. Phoenix and Las Vegas have improved greatly since their “bust” days, though they still retain some of the highest shares of underwater mortgages in the country.
More-modest growth will pace much of the Northeast and the Midwest. Boston is a bright spot in the Northeast, while Minneapolis, Columbus, Ohio, Des Moines, Iowa, and Indianapolis will be among the top gainers in the Midwest. The Detroit area is also showing improvement.
But states and cities that largely rely on strong oil prices will lag the field. Houston’s market is softening, and home prices are falling in Oklahoma City and Tulsa, Okla., Baton Rouge, La., and near fracking hot spots in North Dakota, Wyoming, Ohio and Pennsylvania.