Perspectives: 2016 Forecast

This is an election year. Economists tell us that nothing out of the ordinary typically happens to the U.S. economy in an election year – even in one as crazy as this one is turning out to be. That being said, it doesn’t mean the economy will stop growing or that the housing market will come to a standstill. In fact, according to Windermere’s Chief Economist, Matthew Gardner, employment is anticipated to grow by 1.6 percent in 2016 and unemployment should remain below five percent. This is what is referred to as “full employment”, which means that most people who want a job have one. That’s good news.

Things are also looking good for the housing market in the year ahead. Barring any unforeseeable events, U.S. home sales will continue to rise modestly in 2016. A number of West Coast cities have very strong economies that are poised to just keep growing, so home sales should grow right alongside them. The same is true for U.S. home prices, which will continue to appreciate in 2016, although not at the same pace that we saw in 2015. We’re predicting a more modest 5.5 percent increase, down from 6.8 last year.

Supply and demand continue to be way out of balance in cities throughout the western U.S. We’re optimistic that an increase in homeowner equity and downsizing baby boomers will lead to a modest rise in inventory; this should help address the substantial demand, although not as much as we might hope – or need.

Last, but not least, interest rates. Again, we look to our Chief Economist for insights and he tells us we should see rates gradually rise to about 4.3 percent by the end of the year. So, yes, it’s an increase, but not enough to have a significant impact on home sales.

So there you have it – our forecast for the 2016 housing market and economy. We’re both optimistic and excited to see where the year takes us.