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05 Feb Residential Real Estate Market in the U.S. 2016

The situation of the residential real estate market in the United States is continuing to improve moving towards the summer of 2016. Healthy growth in the market makes buying and selling homes more and more appealing to the public, encouraging the millennial generation to jump into the market and purchase their first homes. House builders have begun, once again, building and selling lower priced housing units which also encourages and attracts the millennial generation. Builders are now catering towards the middle class buyers in order to reach the new demand in the market. Loans are also becoming more readily available as the value of land continues to rise again, now nearly as high as it was at the peak in 2006, giving homeowners more flexibility to purchase, refinance, and expand new property possibilities.

Both the residential and commercial real estate markets are continuing to improve into 2016, but the pace of improvement has now slowed down in the first quarter of the year compared to the final quarter of 2015. This, however, is no cause for alarm because the market is returning to normalcy (meaning growth will continue at a rate that is more consistent to historical values) and has found consistent and healthy growth. New construction projects continue to arise with price options that can be met by most all consumers in the market. Because of the market crash in 2006, many consumers removed themselves from the market and chose to keep what they had, hoping for better prices in the future. In 2015, growth was very noticeable, leading to the high activity we discussed earlier. This is a significant trend that I found in my research—high growth rates in 2015 and a slowdown in the first quarter of 2016. I must again emphasize that this is not a cause for concern, merely a sign of normalcy in the market.

The millennial generation is a large group of new consumers who are eager to join the market this year. These consumers have also contributed to the recent and steady growth in activity in the market. These millennials are seeking after their first home purchases and have been successful to say the least. Home building increased significantly in 2015 for multifamily home units as well as single-family home units. Sales of new homes have improved in the fourth quarter and are currently better than the historical average. Declining mortgage interest rates as well as increasing median family income in the fourth quarter combined to improve affordability (HUD PD&R National Housing Market). These millennials now have more incentive than before to purchase smaller housing units because of the decreased mortgage interest rates and fallen prices. The national average in households continues to rise after 2014 and 2015 and seemed to resemble the growth prior to the crash of the residential market in 2006. These averages, however, have slowed up as many of the millennials have already moved away from home or have chosen to no longer “double-up” with other millennials. These statistics and averages lead me to believe that the millennials play a large role in the residential real estate market, and that they have strong buyer power in regulating prices and dictating demand throughout the whole market.
Many of these new consumers in the market have placed location as their highest priorities. According to the National Association of Realtors new consumers are choosing to move into a close-in suburb area with single-family housing units. To reach this new demand, there have been eight percent increases in both single-family housing starts and single-family housing units sold in comparison to the last quarter of 2014. Consumers have a very positive outlook on the current market situation with a high percentage of current house owners believing that now is a good time to buy, and that house prices and value will continue to increase throughout the upcoming year.

There is some speculation in regards to the stability of the real estate market, and some Americans fear that another crisis such as the crash in 2006 may be right around the corner. This, however, does not deter the confidence of many other Americans as they continue to search for new home purchases. Home ownership has more importance now to the millennial generation than ever before, and it is very noticeable when you look into their recent purchasing patterns. This optimism and desire to purchase and own homes may bring complete stability into the market for the next many years.

It is worth noting that in some larger cities such as Miami and New York, new condominiums and housing units seem to be readily available with fewer buyers than expected, causing a surplus in the market. In years prior, these larger cities had been dependent upon foreign consumers. With the dollar becoming stronger the growth in the Miami residential real estate market has dropped significantly despite the growth in much of the rest of the nation. An example of this is illustrated by the many Brazilian investors in the past. Miami is dependent upon European and higher end South American consumers in order to fill much of the residential properties. An arising problem is shown by the weakening of the Brazilian currency, which no longer enables these consumers to be involved in such foreign investments. The growing strength of the US currency and the weakening of the European currency places European consumers in the same situation as many South Americans. These instances, however, do not seem to fit the general trend throughout the residential real estate market in the U.S. and are mainly found in larger cities with a higher percentage of foreign consumers.

I was able to receive extended information regarding the Colorado Springs, Colorado real estate market and I wanted to share some of the specific growth seen in this city. Denver, Colorado is currently experiencing a boom in the residential and commercial real estate market and this growth has benefited some of the surrounding areas throughout Colorado. Colorado Springs is experiencing extremely low levels of inventory, a 45 percent decrease on days in the market because the current demand in the residential market is so high. Yearly total’s in 2016 already have great reason to celebrate as every category is looking better than 2015, already an abundant year. Average price per home has had nearly 10 percent increase in comparison to 2015 yearly totals, median price has also increased, residential units sold increased by 34 percentage, inventory levels are down 16 percent, with an average days on the market at 60 days, and the driving factor behind much of the success is that the mortgage interest rates are down at historic lows. Colorado Springs was an interesting market to research, and properly illustrates the success seen in many other cities throughout the nation (Empire Title Monthly Stats).

When looking into the current situation of the residential real estate investment banking market one should have a positive outlook upon the whole situation. Healthy growth in the market is making buying and selling homes more appealing to long time consumers and the new millennial generation consumers. Higher median income for families and lower median prices for housing units with decreased mortgage rates have played a significant role in the current state of the market. These lowering interest rates are very attractive to all consumers in the market. Location has also played a role in the market because much growth is seen in the suburb areas. New suburb housing units seem to be an attractive buy for consumers of all ages whether they are looking to buy smaller or larger homes. Consumer confidence may be the most important factor headed into 2016 in the residential market. Purchasing a house is a commitment that will never be taken lightly. The recent productivity and health of the market has led consumers to believe that now is a good time to buy or sell your home, and based upon my research I agree. The market is continuing to grow and shows signs of a healthy future.