Morning Briefing: UCLA economist makes 2016 predictions

by Steve Randall05 Jan 2016
UCLA economist makes 2016 predictions
David Shulman, the senior economist at UCLA Anderson Forecasting, has made his predictions for real estate during the coming year in a letter published by UCLA Ziman Center for Real Estate.

Top of the list is that mortgage rates will rise but will not have a significant impact on the housing market until 2017. In fact, he predicts that increasing rates could see a surge in buyers wanting to enter the market while mortgage rates are still low.

Secondly, Shulman expects millennials to start buying homes again, reversing the recent trend. The decline in events such as marriage and childbirth have also begun reversing he notes.

His third prediction is for further growth in the multifamily sector as rents continue to increase offering attractive returns to investors. Single-family homes being developed by traditional developers is his fourth expectation for 2016.

Finally, Shulman says that the decline in homeownership rates will level off and with growing affordability there will be constraint on rents.
Another thing that could affect home values
There could be an additional item on homebuyers’ checklists following the release of a study by San Diego State University. Dr Georg Matt has been studying the effects of third-hand smoke for two decades and says that smoke pollutants which are absorbed into a home’s porous surfaces can leak out again and be a health hazard. Health conscious buyers may be cautious buying a home which has been owned by a smoker with the potential harmful effects of toxins continuing to be present some months after being exposed to smoke. The study suggests that carpets are a particular ‘sponge’ for the toxins but that walls, especially those made from gypsum, are also likely to be affected.
Luxury homes markets to be hit by Chinese slowdown
Worldwide luxury home prices could drop by up to a half as China’s economic slowdown makes an impact on real estate, although the US should escape. A report by Knight Frank calls for the top 5 per cent of homes in worldwide markets to be at risk. However, US markets that are popular with Chinese buyers, such as New York, may actually see a rise in prices. The report suggests a 5 per cent increase for NYC with Miami in line for a 2 per cent rise. The optimism for the US market comes with a caveat; rising interest rates could curb some investment from international buyers.


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