Both ULI and Realtor.com predict a more stable 2016 housing market with lower but consistent appreciation. They predict 1.42m new homes built, below 2.2m peak in 2006, but above 2015’s 1.14m level and only slightly below demand projected at 1.5m total new units for 2016.
Return of the First Time Buyer, at about 710,000 new homes, is another trend likely to continue. Accounting for 30% of 2015 sales, this group is making both employment and income gains and should rise to be more than 50% sales in 2016. Bolstered by FHA multi-family (400k to be built) community certification changes and increased subsidies, builders will create more affordable homes, moderating price jumps that drove the hottest 2015 market jumps.
Genex & Boomers who are now able to buy again after a tumultuous time of underwater homes that resulted in record short sales and foreclosures will also be looking again for about 200k new homes to buy, after a mandatory three year wait and the need to save for down payments and closing costs.
Retirees are another growing market who will also be snapping up homes as they plan the best years of their lives. This group will likely buy .5m new homes in 2016.
These three groups will gobble up the total projected new home inventory, with no product left for resort second home and other miscellaneous buyers, who should buy 300-500k new homes, creating an inventory shortfall of 200-400k new homes. This will keep builder re-sales steady.