Thanks to price and sales growth, the U.S. housing market outperformed the U.S. economy in the first six months of 2016. Part of that success is demographic driven: Older millennials are looking to grow their families and buy their first home at the same time that some baby boomers are downsizing in preparation for retirement.1
However, the market for existing homes is still struggling as a result of low inventory, which helps explain why 10 percent of homes sold this year are newly constructed, up 2 percent from a year ago.2
After mortgage rates remained relatively steady over the past few years, many projections expected a substantial increase in 2016. However, they remained in the 3 to 4 percent range for most of the year,3 and the number of home sales due to an inability to pay mortgages dropped to a nine-year low.4
Meanwhile, thanks in part to this low-rate environment, residential home prices reached an all-time high in the third quarter of 2016 — higher than even the pre-recession peak.5
Like so many areas of the economy, the housing market experienced a shakeup in the immediate aftermath of the election. There was a slight bump in the 30-year mortgage interest rate to 4 percent, a move that typically drives housing prices down.6 Given the dynamic between interest rates and housing prices, coupled with the fact that the President-elect is a real estate guru, it will be interesting to see how the housing market evolves under the new administration.
Recently, a couple of new studies revealed some other interesting trends in the housing market. One found that since 2012, homeowners without a college degree have seen the value of their homes appreciate by less than 0.2 percent, while college graduates have seen their home values soar by an average 10.8 percent.7
Women still have a more difficult time qualifying for a home mortgage and are more likely to pay a higher interest rate than men. However, one study found that women are less likely than men to default on their home loan.8
For retirees in the market for a property, be aware that a mortgage loan may be structured differently depending on if the property is considered a principal residence, a second home or an investment property.9
1 National Association of Realtors. Nov. 10, 2016. “Expect Busier Months Ahead.” http://realtormag.realtor.org/daily-news/2016/11/10/expect-busier-months-ahead#sf41976874. Accessed Nov. 14, 2016.
3 The Mortgage Reports. Nov. 1, 2016. “November 2016 Mortgage Rates Forecast.” http://themortgagereports.com/22963/november-2016-mortgage-rates-forecast-fha-va-conventional-loans. Accessed Nov. 12, 2016.
4 Kelsey Ramirez. Housing Wire. Nov. 3, 2016. “Median home prices finally pass housing boom levels, hit all-time high.” http://www.housingwire.com/articles/38436-median-home-prices-finally-pass-housing-boom-levels-hits-all-time-high. Accessed Nov. 12, 2016.
6 Diana Olick. CNBC. Nov. 14, 2016. “Panic in housing market as Trump effect pushes mortgage rates to 4%.” http://www.cnbc.com/2016/11/14/trump-effect-pushes-mortgage-rates-to-4.html. Accessed Nov. 12, 2016.
7 The Economist. Nov. 12, 2016. “To those that have.” http://www.economist.com/news/finance-and-economics/21709974-prices-are-diverging-geographic-social-and-ethnic-lines-those-have?fsrc=scn/tw/te/bl/ed/housinginamerica2tothosethathave. Accessed Nov. 14, 2016.
8 Knowledge@Wharton. Oct. 12, 2016. “Why Women Pay More for Mortgages.” http://knowledge.wharton.upenn.edu/article/why-women-pay-more-for-mortgages/. Accessed Nov. 12, 2016.
9 Scott Sheldon. Credit.com. Jul. 22, 2015. “The Surprising Way Your Job Can Impact Your Mortgage.” http://blog.credit.com/2015/07/the-surprising-way-your-job-can-impact-your-mortgage-121451/. Accessed Nov. 14, 2016.
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