What’s in store for US real estate in 2016?
We’re usually already inundated with predictions for the year ahead in real estate by now. One reason forecasters may be late to the party this year is the potential for contradicting trends which leave a lot of uncertainty around the specifics of property market performance over the next 11 months. So what factors are at work now, and what can investors count on?
Interest Rates
Uncertainty over the potential for fed interest rate hikes has been causing chaos in the stock market. It’s still unclear how soon we’ll see a robust series of rate hikes, or if we’ll experience ‘Permazero’ rates for several more years. Odds are that we’ll see some lift in rates in the next 12 months, but they may be slow in coming in order to avoid cramping current economic growth.
Affordability
Lack of affordability is unlikely to ease any time soon. Between Freddie Mac’s new deal to expand the definition of ‘affordable’ to give $18 billion of tax payer money to multi-billion dollar hedge funds for apartments and soaring rents due to the Airbnb Effect the cost of housing is only going up. This may be great for local government revenues, but may cause as much outward migration as it supports urban re-development.
Commercial Real Estate Turmoil
The National Association of Realtors’ Q3 2015 report shows a glut of office space resulting in high vacancy rates. This is only trumped by hotel vacancies which are being hammered by private rentals. On the bright side retail is growing and could be one of the strongest retail sectors ahead if wages pick up and support consumer spending.
Crowdfunding
Industry experts have already lost faith in crowdfunding as being viable for non-accredited investors, even before the final SEC vote on Title III of the JOBS Act becomes law. Still, institutional lenders are reportedly quietly turning to crowdfunding portals as their new generation of mortgage brokers which allows them to get around stringent underwriting mandates and expensive in-house origination costs.
Multifamily
With massive investments being made in multifamily by builders and private equity funds there is a lot of dollars and power that may not want to see a softening of demand for rentals. However, the government could also rely on a resurgence in home buying and lending to push the national economy forward. With millions of boomerang buyers becoming eligible for mortgage loans again and buying homes so much more attractive than renting consumers will be eager to shun landlords if they can.
Stocks
Stocks and tech could continue somewhat supported by growth in real estate, but appear to be set for an overdue crash. This would create even more momentum, with more capital pursuing real estate investments.
Summary
While the specifics of the market in 2016 are still a little cloudy, investors should be able to count on balance, with growth, with more clarity and more robust growth after election no matter who wins.
Authored by Best Transaction Funding BestTransactionFunding.com is the leading source of transactional funding and hard money loans for real estate wholesalers in the US, where 100% financing, and saying “Yes” is what we love doing all day long.
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