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2016 real estate outlook

Last week I went to a great talk by Jonathan Smoke, Chief Economist at Realtor.com, on the current national and local economies, as well as predictions for how this will impact next year’s real estate market. Overall, he had very positive news — both for the US as a whole, and specifically for us here in the Greater Boston area.

In fact, despite all the news we’re hearing about interest rate increases and the potentially harmful effects it could have on the real estate market, Jonathan believes 2016 will be the best real estate market since 2006, and that we have at least two more solid years before we see any type of slowdown.

Some highlights from his presentation:

NATIONAL ECONOMY & REAL ESTATE MARKET

  1. Unemployment is down — we have recovered ALL the jobs lost during the recession

  2. Nationally, home prices have regained ALL value lost and the percentage of “distressed sales” is back to normal levels

  3. Median list prices of homes for sale are up

  4. June 2015 was a new high for median sale price (see graph below)

  5. Rent increases are fueling demand for home sales

  6. In 77% of US counties, it is cheaper to buy than rent

  7. People’s access to credit is (albeit slowly) improving


GREATER BOSTON ECONOMY & REAL ESTATE MARKET

  1. Boston is one of the top 10 economies in the US

  2. Unemployment is down and significantly lower than US overall at just around 4%

  3. New construction starts are back to their previous peak in 2005 (mostly driven by large aparment/condo buildings)

  4. Home sale prices for October were up 15% year-over-year in Suffolk County / 7.1% in Middlesex

  5. A couple Cambridgeville zip codes were among those with extreme year-over-year price increases this October:

  6. 02138 (Harvard Square area of Cambridge) up 43%

  7. 02145 (Winter Hill and East Somerville) up 27.4%

  8. Cambridge’s 02139 (Central Square/Cambridgeport) and 02138 (Harvard Square) were both in the top 10 “hottest” zip codes for the region in 2015 (see image below)

  9. Both Arlington zips 02476 and 02474 held the top two spots

  10. Medford came in at #4

  11. Perhaps surprisingly, Greater Boston will be the #1 real estate market for retiring Baby Boomers in 2016

  12. Greater Boston is also the #4 real estate market for Millennials


 INTEREST RATE FUN FACTS

  1. Going back to 1971 (the year I was born), the average mortgage rate has been 8%

  2. In 1981, mortgage rates hit 18%

  3. The forecast for mortgage rates in 2016 is still a very comfortable 4.65%

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