In a few short days, Halloween has come and gone, and with only a few major holidays left in 2015, it’s about time to start collecting 2016 real estate predictions and see where we stand for the next year.

 

The US economy continues to recover from the brutal Great Recession, and while job gains might potentially bring more home buyers into the market, many Millennials will be kept out due to an unprecedented amount of student debt. $1 trillion, to be exact. That’s a lot of dough – enough to buy all of the major league US sports teams. ALL of them.

 

Expect housing prices to continue to climb, though at a slower pace than we saw in 2015. To be exact, the financial data company CoreLogic predicted a 4.7% increase in home prices from July 2015 through July 2016.

Of all the rising home prices, the West is expected to continue to dominate, San Francisco and Denver especially. This of course isn’t a new trend; the three cities with the largest cumulative price increases since January 2000 are all California Dreamin’: Los Angeles (138%), San Francisco (116%), and San Diego (115%). With water shortages running amok in the media, it might be a surprise that California real estate continues to skyrocket.

There are a few reasons for this, the first of which is that California was hit hard during the housing crisis. Along with Nevada and Arizona (the so-called “Sand States”), California saw housing prices dip well below their peak. They had room to rise, and once housing recovered from its big stumble, rise they did, quickly outpacing the prices in the rest of the mostly-sandless nation.

And this led to the other reason for California’s current reign atop the real estate throne. When prices were near rock-bottom, investors strolled into town and snagged all the properties in an effort to buy low and sell high. So many investors bought so many properties that there was a shortage of inventory, and whenever the delicate balance of supply and demand is disrupted, prices go nuts and buyers lose.

And then there’s Dallas, this humble author’s hometown. According to The Urban Land Institute, Dallas is the #1 real estate market to watch as we go into the new year. #2 on their list was Austin, echoing sentiments found nearly the internet over: Texas’ economy is booming, and then those booms are booming. With such a strong job market (unemployment down to 3.9% from a high of 8.9% in 2009), Dallasites are buying homes in droves, and competing on prices in the process.

Which brings us to FHA rates. They now sit at 3.875%, barely a hair above May’s low of 3.86% and a few hairs above January’s low of 3.81%. Low rates mean big borrowing, which means more houses trading hands, more handshakes, and more smiling faces.

In the coming months, we’ll share some more in-depth 2016 predictions, but this should be enough to get you started on your new year plans.

Feel free to leave a comment below about your thoughts on the predictions, or just to tell us about your experiences in booming markets like California and Texas.