Even as interest rates rise and mortgage credit tightens, there is reason for optimism in the real estate industry according to MarketWatch's Steve Kerch. The housing sector will positively contribute to the overall economy in 2016, after a good year of recovery for the market.
The median home price across the U.S. is expected to rise 5% in 2016 following 2015's 6% increase, which should hopefully help push GDP to a 2.7% growth rate for the year. But, home sales still remain 25% below their peak in 2005.
Cris Deritis, senior director of consumer economics for Moody’s Analytics, said there are three key areas for optimism about housing in the coming year: the labor market is coming back to near full employment, wage growth is finally picking up and there are millions of new households waiting to be formed that have still not done so thanks to the Great Recession.
“The key driver there is we have 4.5 million more 18- to 34-year olds living with their parents than at the start of the recession,” Deritis said. “With rents rising and wages growing — and the parents pushing — that should send many into the housing market.”Lawrence Yun, the NAR’s chief economist, says that housing will continue to recover over the next year, though at a slower pace.