Will 2016 be the best year for housing in a decade? Freddie Mac seems to think so. In its March 2016 Outlook, the mortgage provider outlined all the reasons why it anticipates a banner year for housing. Here are the four biggest ones:
1. Low mortgage rates
Of course, Freddie Mac began its prediction by discussing low mortgage rates. So far this year, they've remained below 4 percent, allowing more people to afford homeownership. Freddie Mac sees these rates rising gradually, not rapidly as they did in 2013 and causing a market cool-down. The outcome could be negative or positive, depending on the global growth of interest rates.
2. Job growth
Freddie Mac called the U.S. labor market "remarkably resilient," noting the amount of job creation since 2011. Citing a recent analysis from Goldman Sachs, the labor force participation rate is expected to plateau. Against the rate of job growth, this ideally will push a rise in wages, which Freddie Mac said will be a key factor in boosting activity in housing markets.
3. New construction
Over the past decade, single-family construction has been in a significant decline. To meet this year's housing demands, Freddie Mac said new construction needs to continue picking up pace. Luckily, in February 2016, they experienced a substantial year-over-year percent increase.
4. Rising prices
In 2015, house prices rose by 6 percent, and Freddie Mac expects them to continue rising at a moderate pace. This is good news for anyone selling a property this year, while it will make affordability more challenging for buyers who don't make the qualifying income.
Despite any downsides, Freddie Mac reached an optimistic conclusion in its forecast. Locally, Indianapolis has already started seeing some of these predictions come true. Recently released data from MIBOR Realtor Association noted increasing sales activity and climbing listing prices. New construction is also booming downtown, where five projects (totaling $250 million) are in development.