Us properties to become less affordable next year

Photo: InAweofGodsCreation

US properties are set to become less affordable next year, as rents climb and first-time buyers have to wait longer to buy a home.

A new forecast from Zillow paints a bleak picture for a generation of would-be homeowners stuck in rental territory, as a lack of affordable homes near city centers is predicted to push new and first-time homebuyers to suburbs that feel like walkable, amenity-rich mini-cities.

The median expectation of more than 100 economic and housing experts surveyed in the latest Zillow Home Price Expectations Survey was for home values to grow about 3.5 percent in 2016.

This growth in home values will outpace incomes, especially for low-income Americans, predicts Zillow, with those whose incomes fall in the bottom third priced out of homeownership and unable to afford even the least expensive properties.

All the while, the looming threat of rising mortgage interest rates will "slowly erode some of the terrific mortgage affordability the market has enjoyed for the past few years".

Rising rents also "won't let up", continuing to set new records.

As a result, conditions will drive the median age of first-time buyers up to record highs.

"In 2016, we'll start to see more people in hot coastal markets forced to move farther from the core of the city to find housing. When they get there, they'll be looking for amenity-rich suburbs – mini-cities, with walkable cores and an urban feel," comments Zillow Chief Economist Dr. Svenja Gudell.

"As renters gradually transition into homeowners, the historically low homeownership rate should stop falling quite as quickly as it has been. However, the median age of first-time homebuyers – already the highest it has ever been at about 33 – will climb higher. Millennials want to buy, but they are waiting longer than previous generations."