Real Estate Executives Forecast More Growth in 2016

New home sales and prices should rise in the coming year, say recent projections from housing industry executives, while the chance of a downturn over the next three years appears less likely than it did one year ago.houseglass

These were a few of the key takeaways from The Summit, a two-day conference hosted by John Burns Real Estate Consulting. Held in early May, the event gathered nearly 80 real estate industry executives — including home builders, land developers, and investors – to gauge where the U.S. housing market is headed in the coming years. As a subscriber of the company’s research, Pacific Union CEO Mark A. McLaughlin attended The Summit, the only executive from a residential real estate brokerage at the conference.

When asked to project home price growth over the next year, 69 percent of attendees felt that prices will rise by 2 to 5 percent. Last year, the majority of attendees called for 5-percent appreciation, and the company’s Burns Home Value Index indicates that prices actually rose by 4.1 percent. JBREC predicts price of growth of 5 percent in 2015 and 4.5 percent in 2016.

Conference participants also expect new home sales to increase by about 10 percent from 2015 to 2016, down from JBREC’s current forecast of 12 percent. Fifty-three percent of attendees believe that new home sales will rise by 5 to 10 percent, while 38 percent predict sales gains of 10 to 20 percent.

This year, real estate industry executives are more optimistic about the overall state of the nation’s housing market. Attendees put the chance of a housing downturn at 17 percent, compared with 22 percent at last year’s event.

Along with home prices and sales volume, most conference participants also think that mortgage rates will increase over the coming year, with 59 percent predicting gains of between 0.25 and 0.75 percent. Another 36 percent believe that rates will remain essentially flat. Currently, JBREC projects that mortgage rates will rise by 0.3 percent over the next year.

According to the company, a key area of disagreement involved investment location. The majority of participants felt it was preferable to invest in more expensive markets with plentiful jobs — such as downtown San Francisco — because even if greater costs mean lower returns, such areas will always be in demand. Others indicated a willingness to venture into outlying areas because they feel the risk/reward proposition outweighs the high prices of real estate in urban centers.

JBREC says that attendees also were split on homeownership rates amongst millennials. Some feel that fewer millennials will own homes due in part to affordability conditions, while others believe that ownership rates will be about the same as with previous generations – just delayed.

In November, Pacific Union and JBREC will team up for the second consecutive year to deliver the San Francisco Bay Area Real Estate and Economic Forecast 2018, which will offer our clients an exclusive, in-depth look at what to expect in Northern California in the coming three years.

(Image: Flickr/Mark Moz)

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