Housing Market Could Soar in 2016, But Concerns Linger: Freddie

Register now

The housing market is poised to post its best year in a decade, although employers' resistance to giving workers a raise is a major concern, Freddie Mac said on Thursday.

Freddie Mac predicted that home sales, housing starts and house prices will reach their highest levels since 2006, according to a news release. Those metrics will be driven by low mortgage rates, as rates on the 30-year fixed have remained below 4% this year.

An improving labor market should also propel the housing market, Freddie Mac said. The unemployment rate recently dipped below 5%, and an average of 205,000 net job gains has been posted each month since 2011.

Even so, wage growth has remained "anemic, barely keeping pace with inflation," Freddie Mac said. Of further concern is that labor force participation has "fallen substantially."

"If wages and incomes do not start rising, then rising interest rates, home prices and rents will squeeze households and ultimately slow housing markets," Freddie Mac said.

Another potential bright spot for the housing market is an uptick in housing supply, as low inventories have weighed down the housing market in recent months. Single-family housing starts rose year-over-year in February, but current rates are still well below normal.

For reprint and licensing requests for this article, click here.