Deteriorating housing affordability nationwide will put a damper on home buying next year, according to a report from Zillow.
Rising rents won’t let up and will continue to set new records, Zillow predicts, as 2016 will bring the least affordable median rents ever. As a result, rising rents will force more young renters to wait longer before buying a home.
The median age of first-time homebuyers is expected to be the oldest yet, as millennials put off homeownership and other major life decisions.
“As renters gradually transition into homeowners, the historically low homeownership rate should stop falling quite as quickly as it has been,” Svenja Gudell, Zillow’s chief economist, said in a company statement. “However, the median age of first-time homebuyers, already the highest it has ever been at about 33, will climb higher. Millennials want to buy, but they are waiting longer than previous generations.”
Another wrench in the housing market, Zillow reports, is the looming threat of rising mortgage interest rates that will erode the mortgage affordability that the real estate industry has enjoyed for the past few years.
“That will make some homeowners think twice about selling, and many of them will decide to remodel their current homes instead,” Gudell said.
While many will be priced out of buying a home next year, especially in locations close to city centers, people will move to suburbs and beyond. Zillow foresees that clustered homes in walkable communities with an urban feel that offer good access to nearby cities will be 2016’s new housing hot spots.
“In 2016, we’ll start to see more people in hot coastal markets forced to move farther from the core of the city to find housing,” Gudell said. “When they get there, they’ll be looking for amenity-rich suburbs, mini-cities, with walkable cores and an urban feel.”