What Should We Expect in 2016
A decline in export growth can be partly attributed to Trend number two: the strong U.S. Dollar. Right now the Dollar is trading at highs last seen in March, 2015. A rising Dollar depresses exports, making our goods more expensive overseas. The Dollar is buoyed by rising interest rates and by foreigners looking for a safe haven from the world’s woes. A lot of money flowed into the U.S. last year from China, Brazil, and the Middle East seeking safe haven. The Federal Reserve’s raising interest rates will make the Dollar stronger.
That also means Trend number three: Interest rates stay low. The FED has said they are committed to ¼% increase each quarter in 2016. That doesn’t square with Daren Blomquist of RealtyTrac who says the industry is “addicted” to low rates and Ben Bernanke who said we would not have normalization of rates in our lifetime.
Trend number four is low oil prices. There is currently an oversupply of oil in the world and large quantities are stored in tankers off shore in the U.S. and many countries. Many oil producers are in so much debt that their companies are in peril of bankruptcy. Expect oil prices now at $37 to stay low and prices at the pump to even go lower. Oil prices are a function of oversupply and a soft world economy.
The fifth Trend for 2016: is housing affordability. For a quarter of a century, back to 1990, median incomes adjusted for inflation have been flat. Yet, housing prices in many places are higher today than they were before the housing crash. The gap is wider than ever today. Renting is not a solution. Renting requires a bigger slice of take home pay than home ownership, leaving little savings for the down payment.
Many have predicted that Millennials would come into the housing market and save the industry. So far that hasn’t happened. Partly it is affordability.
Svenja Gudell, recently appointed chief economist for the housing site Zillow.com, was quoted as saying, “Millennials are going to be bigger and bigger buyers in the market going forward. I don’t think next year we’re going to see a flood of millennials in one month or another. They’ll just trickle in.
“They’re taking their time getting to the market and buying a home. They’re getting married later on in life. They’re having children later on in life. So they’re making home buying decisions later on in life.
Many millennials don’t have the income to buy a house over $111,000 plus their credit scores take a hit because of their student loans on which they have many missed payments. They are caught between high rents and houses they can’t afford unless a relative bails them out.
If the economy continues to improve, and wages play catch up, mortgage rates stay low, and oil prices stay where they are or even go lower, housing should be a good investment. The market will continue to be a seller’s market and 2016 in the Los Angeles area will look much like 2015. That’s a lot of Ifs. The one big factor that will upset all forecasts is war in the Middle East. War could be a Trend for 2016 that will affect real estate and our economy. With so many countries fighting or backing troops in the area, an accident has high odds of happening.
Coal to Cash Homebuyers, Inc. is a cash buyer solution. We are here to help homeowners out of any kind of distressed situation. As investors, we are in business to make a modest profit on any deal, however we can help homeowners out of just about any situation, no matter what! There are no fees, upfront costs, commissions, or anything else. Just the simple honest truth about your home and how we can help you sell it fast to resolve any situation.
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