09 Dec 2016 San Diego real estate forecast shows flat growth but shortages could boost prices
The forecast for home sales in 2016 predicts flat growth — home sales are predicted to barely rise next year — but growing demand for San Diego real estate might ease some market pains.
National Association of Realtors’ Chief Economist Lawrence Yun predicted 5.4 million homes will be sold in the U.S. in 2016, barely inching up from 5.3 million expected this year.
Rising interest rates, a tighter inventory and affordability are all expected to impact the real estate market in 2016, Yun said during a speech at a San Diego real estate conference as reported in the San Diego Union-Tribune.
Interest rates are expected to rise to 4.5 percent in 2016, and easing of credit restrictions by Freddie Mac and Fannie Mae could boost sales as more people with lower credit scores are expected to get mortgage approval. Even so, home ownership is at a 50-year low and young millennials aren’t particularly anxious to be tied to a mortgage just yet. Existing home prices are expected to rise by 4.6 percent in 2016, down from nearly 6 percent this year.
How San Diego real estate could be affected
Yun pointed out San Diego for its housing shortage — 21,000 new homes have been constructed since 2012, yet more than 101,000 jobs were created, he said. And affordability remains an issue.
The shortage could inflate housing values as competition increases for real estate in San Diego, even as San Diego surpasses national real estate averages. San Diego real estate prices rose 6 percent year-over-year in August, compared to national averages, which rose 4.9 percent from September 2014 to September 2015. From August to September, the prices of homes for sale rose 0.6 percent, above the national average of 0.2 percent.