SAN DIEGO — After a couple years of soaring costs, home price increases should moderate in 2016.
Higher mortgage costs, a continued tight supply and cooling economies in some states should reduce the rate of home price and sales increases, top industry economists said Friday.
“This year home sales have increased 13 percent” in dollar volume nationally, Lawrence Yun, chief economist for the National Association of Realtors, told industry members meeting in San Diego. “Next year it will not grow that strongly. Home sales will only rise about 3 percent.”
Nationwide home price gains will average about five percent in 2016, he forecasts.
But in Texas, home appreciation will be lower than the national average because of downward pressure in energy markets, economists say.
Texas home prices will grow by less than 2.5 percent annually over the next two years, according to CoreLogic and Moody’s Analytics.
Texas home prices are up almost 8 percent this year.
“Over the next two years we expect house prices to rise at a nationwide rate of 3.3 percent — that’s a little bit slower,” said Chris Deritis, senior director of Moody’s Analytics.
2015 has been the best period for the country’s housing market since before the recession clobbered values in most parts of the country.
Growth in the housing sector is now adding to national economic gains.
“Housing led us into the recession, and we spent many years dealing with the foreclosure crisis,” Deritis said. “We are projecting existing home sales and new home sales will continue to rise.
“There will be pockets of construction that will help to boost the economy by increasing demand for construction workers. That will help sustain our recovery.”
Young Buyers
Real estate agents and builders are still counting on young buyers to help keep the housing market expanding.
Since the recession ended, fewer millennials have opted for homeownership than forecast.
First-timers made up less than a third of buyers in 2015 — a 30-year low.
“I thought we would see an uptick this year in first-time buyers,” Yun said.
A lack of home inventory and high student loan debt levels have kept many millennials out of the market, he said.
Still, surveys show that more than 90 percent of 18-to 24-year-olds want to own a home at some point, according to the Realtors.
“Younger people have an actually bigger dream for homeownership,” Yun said. “People still associate owning a home with the American Dream.”
Yun is forecasting that nationwide pre-owned home sales will total 5.4 million to 5.5 million in 2016, up from 5.3 million this year.
Energy’s Impact
A decline in job growth in energy states will hurt sales in some markets.
“If you depend on the energy industry, you are dead meat,” Yun said.
In Texas, the major markets are acting very differently, he said.
“Dallas is still creating jobs,” Yun said. “Today, Dallas is no longer oil country; they have a very diversified economy.
“It is Houston that is taking the hit.”
Home sales in Houston last month were about 10 percent below where they were in October 2014.
North Texas home sales are up about 5 percent this year. And median home sales prices are 11 percent higher.
“Right now, Dallas is doing quite well,” Yun said.
Nationwide, home prices will grow about 5 percent in 2016, and in Texas the increase could be less than 2.5 percent, according to industry forecasts.
