Some Changes to Expect in Housing and Real Estate in 2016

Housing Forecast 2016Freddie Mac’s forecast for the 2016 housing market is a paradox; the mortgage powerhouse expects that changes in the mortgage market are inevitable, yet it is unsure on how new game players such as marketplace lending may or may not become the new business model in real estate financing.

Sean Becketti, Freddie Mac’s chief economist, believes “the current generation of marketplace lenders all may fail in the next economic downturn.” Citing the possibility of regulators imposing higher standards on marketplace lenders, the cost advantages of marketplace lending may simply not extend toward mortgage lending in the long run.

However, Becketti does acknowledge that change is inevitable--

"Innovation is difficult to stop. New startups will look for ways to improve upon current marketplace lending business models. Large bank lenders may incorporate the most successful of the marketplace lending innovations. It's difficult to say where all this will lead, but one prediction is indisputable. Expect change."

Here are Freddie Mac’s 5 predictions for the housing market this 2016:

  1. The 30-yr fixed-rate mortgage is highly likely to average below 4.5% annually.
  2. Mortgage rates will gradually climb and pose challenges on affordability. However, forecasts on the strengthening labor market and pent-up demand will sustain strong market activity well into the new year.
  3. Home prices are projected to decrease by 4.4%, partly due to decreased home buyer affordability and decrease in demand due to constricting new Federal regulations.
  4. Housing market will generally grow in 2016 despite stricter Federal regulations on financing. Forecasts predict an increase of 16% in total housing annually, with total home sales increasing to 3% per annum as well.
  5. Overall mortgage originations will decrease in the new year due to higher interest rates that will reduce the refinance volume.

The comprehensive forecast published by Freddie Mac can be accessed here.

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