2015 was a good year for real estate in the Ozarks. Most of the major categories we monitor to determine the health of the market increased. Homes sold faster and brought in higher sales prices than the year previous. Overall, that success is primed to transition into the next twelve months. The real estate market isn’t showing any signs of slowing down and I remain optimistic about further jumps in the viability of the market in 2016. In this article I’ll discuss a few key points that could have a major impact on the buying and selling of homes this year.
MORTGAGE INTEREST RATES
This is an issue that may cause concern for some. Rumblings about an increase in the federal fund rate had been occurring since March of last year. It was talked about intensely for the following nine months and caused unease in some financial circles. We covered this issue back in early December. The amount in which the rate was raised is minimal compared to what interest rates have been in the past. Before the economic downturn in 2008, interest rates hovered around 6%, and in the 1990s rates were as high as 11%. Today mortgage interest rates rest around 4%. Despite a slight increase in December, a 3.92% rate is fantastic for anyone considering a home loan. We’ll keep monitoring the rates and speaking with our colleagues in financial institutions to help our clients navigate these issues. Any time you have a question about financial real estate issues, feel free to call us.
In 2015 we saw a significant increase in the market. According to MLS data, sales rose 34% year over year from 2014 to 2015. That’s a great thing for sellers. I believe it will continue to be a seller’s market in 2016. In an interview with the Springfield Business Journal this week, our managing broker Jeff Parker estimated an increase of 5-10 percent in home values for 2016 and I concur with that assessment. We think the market is strong in its current state, and that it will continue to improve. Don’t just ask me, though. Inman News, a leading real estate blog in the country conducted a surveyrecently asking 163 of its’ readers how they felt about the housing market right now. 73% percent had a favorable view of the market for 2016, while only 5% had a negative outlook. 80% of respondents suggested they believe home values in their market will appreciate, as well.
During the recession of 2008, new construction halted and the Greater Springfield market felt the impact of the lack of options for potential buyers. The growth of new construction in the area has boosted the market in several key ways in the past few years. It gives the element of choice to a buyer. We’ve seen new subdivisions and phases in our market as builders get back into development.
It is worth noting that Millennials make up 34% of the workforce in the United States, according to Pew Research. 2015 was predicted by many real estate and financial sites to be a huge year for millennials to enter the home buying market. By many accounts, these predictions were true. Millennials did become one of the largest groups of home buyers in the marketplace, but they were a different kind of buyer. Millennials tend to be pensive and conduct massive amounts of research. This bodes well for our market. The average price in the Springfield area was $152,757 in 2015, well below the national average. If a first time home buyer compares this with other metropolitan areas, he or she will find excellent value in the Ozarks. Paired with a lower cost of living, the affordability of housing will be an enticing factor to millennials in the area.
According to the most recent data available, rents have risen more than $50/month in the past two quarters and more than $100/month since 2009. This trend is primed to continue, though at a lower rate than the national average. Most available sources cite the average rent in Springfield at around $670. With rates at the time of this writing at 3.99%, a person could purchase a $144,000 home and spend only one dollar more per month on a 30-year fixed rate mortgage with a 10% down payment. This includes mortgage insurance. In short, owning a home can be more affordable than renting in Springfield, and it certainly is a better investment in the long run. According to neighborhoodscout.com, homes have appreciated 18%since 2005 in the Greater Springfield area and 88% in the past 25 years.
All in all, it’s a good time to be in the market. The Greater Springfield area maintains a steady growth in population, commerce, business and low cost of living. All of these factors along with the data we’ve collected from the MLS leads me to believe the outlook for 2016 is solid. I believe we’ll continue to experience higher home values, more sales and plenty of options for our clients.
As always, if you need assistance in any part of the purchasing or selling process, give an agent from Murney a call or catch up with us online. We pride ourselves on being the most knowledgeable brokerage on our community and on our ability to give you the most comprehensive coverage possible for one of the largest investments a person can make.
We’d be happy to help you find the right place for you and your family in the next year.
Have a great 2016,