Metrostudy recently revealed their 2nd Quarter 2016 National Residential Economic Report. The report takes an in depth look at several housing numbers as well as economic indicators across the nation and uses them to formulate a modeled forecast. The modeled forecast illustrates the over/under supply patterns and over/under valuation patterns in the housing market in past years and predicts both of those patterns over the next five years. The report for 2016’s second quarter suggests that, all in all, the U.S. housing market should be a stable one over the next five years. I’ll highlight a few statistics that stood out to me.

Housing construction has been on the rise over the past few years and is expected to continue to increase to close out 2016. Because of this, the forecasted number of permits for all of 2016 has increased from 1.2 million to 1.28 million, which would mean 1.1 million new homes and apartments constructed for all of 2016.

Currently, 2.8 jobs are being created for every home built in the United States, which is much higher than the overall rate of 1.06 jobs for every existing home. This indicates that the demand for housing is increasing at over twice the rate of housing supply.

Mortgage rates have actually continued to decline from the level they reached in December of 2015. Metrostudy does expect them to increase in the fourth quarter of the year though and continue to gradually increase throughout the next five years.

All this and more factor into Metrostudy’s housing supply and demand model which forecasts an undersupply of housing over the next five years, peaking in 2018 and 2019. Looking beyond supply and demand, Metrostudy has their housing value and affordability model. This model has 2016 as an equilibrium year, but forecasts over valuation over the next five years as mortgage rates gradually rise.

These two models are used to create Metrostudy’s Residential Market Opportunity/Risk Index, which predicts that the combination between value and over/under supply will likely create stable market conditions over the next five years. It forecasts an elongated cycle with little appreciation potential but a healthy amount of transactions and volume due to a strong underlying demand.

For more figures and an in depth breakdown of Metrostudy’s 2Q16 Residential Economic Report from their Senior Vice President & Chief Economist, Mark Boud, click here.

Buying or selling a home or simply want to discuss where the market's headed? Give me a call at 713.829.3052 or email me at cynthia@cynthiamullins.com.

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