Interest Rate & Housing Outlook for 2016

Posted on by Evan in Housing & Real Estate, Swanson Home Loans Blog - Mortgage Rate Updates and More

It was John Kenneth Galbraith who once said, ‘Economists don’t answer because they know.  They answer because they are asked.‘  The reality is that no one has a crystal ball.  That said, economists tend to use technical sounding language and accompany their forecasts with plenty of graphs so many of us like to think they may be able to accurately peer into the future.

One of the most esteemed housing economists is Dr. Frank Nothaft who holds the position of Chief Economist for Core Logic.  His national housing outlook for 2016 was published in the December 2015 issue of ‘The Market Pulse’ report.  His predictions are:

  • Mortgage rates up 0.5%
  • Household formations exceed 1.25 million
  • Rental market remains ‘tight’: vacancy low, rents rise
  • Owner  market: sales up 5%, home prices up 4-5%
  • Originations: less single-family, more multifamily

Looking for a more local outlook?  the ‘Portland Business Journal’ released THIS OUTLOOK in their latest issue.

Most economists are predicting another strong year for housing in 2016.
Most economists are predicting another strong year for housing in 2016.

Want to know what I see?  I tend to think the Portland housing market will remain strong in 2016.  The outlook for the local job market is robust when you take into account the Nike expansion, OHSU Knight Cancer Research Center expansion, Under Armour relocation, and the local tech industry.  The question is whether housing inventory will begin to loosen or remain ultra-tight.  I believe mortgage rates will increase gradually over the course of the next 12 months (assuming no unforeseen adverse economic or geopolitical event) but remain below 5.00% for a 30-year fixed rate.  The reality is inflationary pressure is still meager which will prevent rates from increasing more than that.  With rates rising gradually I am hopeful, but not convicted, that would-be sellers will be encouraged to bring their homes to market and relieve some of the imbalance between demand and supply.  In another year, I think we’ll look back and see that the median home price will have increased by 5-7% locally with multi-family properties outperforming single family residences.

What do you think?  Feel free to leave your view in the comment section below.