Six important things to know about the 2016 housing market

If you're thinking about buying a home this year - and many Americans are - here's what you need to know about the housing market in the months ahead.

Steve Dipaola/Reuters/File
Homes are seen for sale in the northwest area of Portland, Oregon (March 20, 2014).

Buying a home is still part of the American dream.

According to a survey from Trulia, 75% of Americans dream of owning a home, up 1% from 2015. This dream is even more pressing among Millennials because 80% of those surveyed would like to buy a home — and 31% would like to do so by 2018.

Whether you're looking to buy a home this year or already own one, there are important factors that will affect your investment. Here are the six important things you need to know about the housing market in 2016.

1. Mortgage Rates Are Staying Low (For Now!)

The Fed's December 2015 interest rate hike had many consumers worried that rock-bottom mortgage rates would finally come to an end. However, the economic events of the first two weeks of 2016 show that low mortgage rates will stick around for a bit longer.

Given the lackluster performance of the stock market, many investors are buying bonds and driving down the yields of these investment vehicles. This is great news for those looking for a home loan, because the interest rates on 30-year mortgage loans are highly correlated with the yield of the U.S. Treasury 10-year bond. According to data from the Federal Reserve Bank of St. Louis, the average 30-year fixed rate mortgage average in the U.S. was 3.97% on January 7, 2016, down from 4.1% in December 31, 2015.

2. HARP Refinance Deadline Receives Extension

Many experts expect mortgage interest rates to increase further down the road. Those mortgage holders that haven't been able to refinance to a lower rate yet should think about doing so this year — especially homeowners that are underwater on their mortgages.

As of January 2015, about 700,000 borrowers who owed more than their homes were worth were still eligible to refinance their loans through the HARP program from the Federal Housing Finance Agency (FHFA). HARP was originally set to expire at the end of 2015, but it was extended for an additional year, until the end of 2016.

Nearly 3.3 million Americans have benefited from a HARP refinance to lower their monthly payments on their mortgages. The five basic requirements to qualify for a HARP refinance are:

  • Loan was originated on or before May 31, 2009.
  • Property is a primary residence, one-unit second home, or one- to four-unit investment property.
  • Loan is owned by Freddie Mac or Fannie Mae.
  • Current loan-to-value ratio must be greater than 80%.
  • Borrower is current on the mortgage, with no over-30-day late payments in the last six months and no more than one in the past 12 months.

There are still close to 430,000 HARP-eligible loans out there and you can check the eligibility of loans by zip code.

3. Home Prices Are Rising Less Than in Previous Years

One of the necessities that will be cheaper in 2016 is the single-family home. In 2016, the national average price for a single-family home is expected to be 3% higher than last year, a much slower rate of growth than 2015's 5% increase.

However, some markets will experience bigger price bumps, such as Sacramento, California with an expected 15% increase, and other markets will experience smaller price bumps, such as Houston, Texas with an expected 1.1% increase.

4. Rent Prices Are Increasing Faster

On the other hand, rent prices are expected to increase sharply. In the third quarter of 2015, U.S. home buyers were spending 15% of their monthly income on the mortgage payment of a typical home, while U.S. renters were spending 30% of their monthly income on the rent payment of a median-valued property.

Higher rent prices will continue to be norm in 2016. According to a survey of more than 500 large U.S. property managers, rental inventory is at the lowest level in over 20 years.

A smaller inventory of available units for rent enables landlords to demand higher prices from renters. Of the surveyed property managers, 55% reported to be "less likely to offer concessions or lower rents to fill vacancies" and 68% of them expected to continue raising their rental rates in 2016 by an average of 8%.

5. New FHA Loan Limits Take Effect

On December 9, 2015, the Federal Housing Administration (FHA) announced its new schedule of loan limits for 2016. FHA home loans allow homebuyers to access financing with a minimum 3.5% down payment of the market value of the property, among other requirements.

Given the changes to median house prices in certain metropolitan areas, in 2016 the maximum FHA loan limit is higher in 188 counties. However, the maximum nationwide FHA loan limit remains at $625,500 (here is a list of areas that are at the ceiling or that are considered "high cost.")

On the other hand, in 2016 the minimum FHA loan limit doesn't decrease for any areas in the country.

6. Fannie Mae Loosens Some Requirements

The Federal National Mortgage Association (FNMA), better known as Fannie Mae, is giving Americans a break in 2016. Through its new HomeReady mortgage program, Fannie Mae aims to broaden access to home financing to credit-worthy low-to-moderate income borrowers.

Some of the loosened requirements from Fannie Mae include:

  • Borrower isn't required to be a first-time homebuyer;
  • Down payment can be as low as 3% of property's market value;
  • Gifts, grants, and cash-on-hand are acceptable funds to cover downpayment and closing costs;
  • Nontraditional credit is allowed;
  • Income from non-borrower household members can be counted as part of the debt-to-income ratio of the borrower; and
  • Underwriting process includes additional flexibilities.

To learn more details about the HomeReady program, call 1-800-7FANNIE (1-800-732-6643) or visit

This article first appeared at Wise Bread.

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to