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The Secret Expected To Propel Real Estate In 2016

Published on Wednesday - September 16, 2015

There is one overlooked factor set to ignite a new surge in U.S. real estate sales. Are you ready for it?

Home prices and sales in the United States have been climbing for several years. Some wonder if this trend will continue, especially at its current pace. Others aren’t sure what to make of tempering price gains. There’s one major factor, however, that is set to influence American home sales in 2016. Oddly enough, nobody seems to be talking about it yet. So what is it, and what does it mean for you?

Housing sector fundamentals are lining up to allow for more growth within the real estate industry. Some of the most recent moves include:

  • Millennials entering peak homebuyer age and financial status
  • Homebuilder confidence and new home construction adding inventory
  • Billions of dollars in distressed properties coming to market
  • Mortgage lending easing
  • Higher rates coming, which will encourage more aggressive lending
  • Homeownership levels down to 1960s levels, but with bigger numbers due to population growth

Truth be told, all of this is just kindling to the surge that is expected. There is still one more thing investors should keep an eye out for.

A healthy housing market should see about five million home sales a year. However, experts are expecting to see over 20 million homebuyers enter the market over the next few years.

Foreclosures grew steadily between 2003 and 2012. According to data from Statistics Brain, foreclosures soared from 660,000 in 2003 to a high of almost 4,000,000 in 2011. In 2013, there were almost 1.5 million foreclosures, nearly 1 million foreclosure filings, and just shy of 500,000 home repossessions.

As foreclosures increased, the number of buyers and real estate investors in the game seemed to shrink. It can take 7 to 10 years for individuals, many of which are now separated couples, to get their credit back in track enough to get a home loan. While some may have already found a way to buy, this means we’re about to add an additional 1 million homebuyers to the buying pool each year. Some of these are boomers, but it is also likely a vast majority of generation X. That means they likely aren’t all looking for tiny houses, micro-apartments, or starter homes. They are bouncing back, and want to keep moving up the ladder.

In tandem with rising wages, low debt burden, and still reasonable interest rates, we should see swelling buying numbers for years. Add today’s rental rates to this, and buyers should be even more motivated to purchase. Nobody should overlook the wider impact of more home sales either. With freshly polished credit and a better financial situation, consumers should keep bolstering their spending. Beyond home related spending at furniture stores, we are talking about general retail shopping, and car shopping. All this should help fuel the economic stimulation.

What does this information mean for real estate professionals and businesses?

Real estate professionals need to keep an eye on this trend. Focus on branding and marketing to Millennials. However, don’t neglect returning buyers either. Many of them will qualify for first-time homebuyer mortgages and other perks sooner rather  than later. They also need brands they can relate to, and that understand their situation.

Both new buyers and returning buyers need to be alert to this big surge in competition. Your credit isn’t going to fix itself. Good credit is just as much about rebuilding good credit as it is about letting the bad credit fade away. The sooner you get back on top of the credit game, the sooner you’ll be able to buy. The earliest in will enjoy the lowest property prices and the fastest equity growth. That’s not to mention avoiding the challenges of even more intense competition that comes with more homebuyers in the housing market.

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