Investors looking at the US property market next year can expect a virtual repetition of this year’s figures. In a nutshell, 2016 will see more high sales and price rises along with continued increases in rental rates and low vacancy levels within the rental market.
According to the CoreLogic Peering into 2016: The Outlook for Housing, predictions for the US property market over the next 12 months are based on five premises, all of which broadly mirror those seen during 2014. CoreLogic, a property market research specialist, bases its 2016 expectations on economic consensus for next year. Analysts expect the US to continue its expansion and enter its eighth consecutive year of growth in the second half of 2016. They forecast between 2 and 3 per cent GDP growth, a figure that will continue to boost employment creation.
Against a backdrop of economic growth and new jobs, CoreLogic makes five main predictions for the property in the US during 2016. Four of these are of particular relevance to those looking to invest in US property:
Higher interest rates: Financial analysts have been expecting a rise in federal interest rates throughout this year and CoreLogic believes that 2016 will be the year when they finally start to go up. This will inevitably lead to an increase in mortgage rates, although this is likely to be moderate with around 0.5 per cent forecast in the average mortgage rate. Despite this slight uptick, mortgages in the US will still enjoy some of the lowest interest rates ever with minimal effects on the housing market as a whole.
More households: The increase in the number of jobs available in the US has led to a big hike in the number of households in the country. CoreLogic forecasts that around 1.25 million new households will be formed during 2016. This rise will inevitably lead to increased demand within the US property market and since most new households will be looking to rent rather than buy, the rental market will be the one to feel the most pressure.
Strong rental rates: The US rental property market is already under considerable strain. Monthly rental rates have been rising steadily for several years and there’s no sign of this abating. CoreLogic predicts that monthly rental rates will grow at above inflation rate.
In addition, vacancy levels will remain low. They are already at their lowest for 30 years in many areas of the US including Florida where some metro areas are also registering their highest rental rates ever. With 1.25 million new households entering the market in 2016, the rental market will continue to produce excellent results for the buy-to-let investor.
Increase in sales and prices: 2015 has been one of the best years for US property since the economic crisis in 2008-9. This is particularly true of the Florida housing market, registering the highest number of sales and biggest price increases since 2007. CoreLogic expects a similar pattern throughout 2016.
They believe that continued job creation will lead to brighter financial prospects among US households and many will be motivated to buy property. As a result, CoreLogic is forecasting that 2016 will be best year for sales of property in the US since 2007. Prices will continue to rise, although a slightly more moderate rate than during 2015. The nationwide average recorded by CoreLogic in 2015 was 6 per cent and between 4 and 5 per cent is expected for 2015.