As 2015 comes to a close, loan giant Freddie Mac recently began to look forward to 2016. Here are five predictions they have projected to happen:
- The 30 year fixed rate mortgage for conforming home prices (below $417,000) will average below 4.5 percent in 2016, on an annualized basis.
- Though interest rates will increase, a strong labor market will make up for any affordability challenges the higher rates may create. The better job market will also increase demand, so strong numbers in 2015 should continue next year.
- The one thing reduced homebuyer affordability will affect, though, is home prices, which should grow by 4.4 percent in 2016.
- A strong 2015 has lead to poor inventory levels nationwide. Expect housing starts to increase by 16 percent next year to put more homes on the market. With more houses out there, total home sales should also increase by about 3 percent.
- Historically low interest rates in 2015 lead to a rush of refinancing applications. With interest rates going up, refinancing will be considerably lower in 2016. This will also result in a lower overall volume of mortgage applications next year compared to 2015.
When the Federal Reserve voted to increase interest rates earlier this month, many in the industry worried that the market may suffer, but Freddie Mac obviously doesn't see that as the case. In fact, an economist for the company said that rates, though higher than in 2015, will still be at "historically low levels" next year.
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