Realtor.com Predicts Healthy 2016 Housing Market

San Jose, CA, December 3, 2015—New home construction and moderate gains in the existing home market will deliver the necessary one-two punch to push total home sales to the highest levels since 2006, according to the 2016 housing forecast by realtor.com.

The 2016 housing market is expected to be a picture of moderate, but solid growth as acceleration in existing home sales and prices both slow to 3% year over year due to higher mortgage rates, continuing tight credit standards, and lower affordability.

The new construction market will see more significant gains in the coming year as new home starts increase 12% year over year, and new home sales grow 16% year over year.

Total sales for existing and new homes will reach six million for the first time since 2006, a result of a strong gross domestic product increase of 2.5% and continued job creation. These healthy economic indicators will be tempered by lack of access to credit and rising home prices, which will ultimately limit housing demand and growth

"Next year's moderate gains in existing prices and sales, versus the accelerated growth we've seen in previous years, indicate that we are entering a normal, but healthy housing market," said Jonathan Smoke, chief economist for realtor.com. "The improvements we've seen over the last few years have enabled a recovery in the existing home market, but we still need to make up ground in new construction, which we could begin to see in 2016. New home sales and starts will bring overall sales to levels we have not seen since 2006 and will help set the stage for a healthy new home market."  

Next year's standout year in total sales will be driven by three distinct segments of home buyers: older millennials (25-34 years old), younger gen Xers (35-44 years old), and retirees (65-74 years old), according to Smoke.