Hello 2016! There’s nothing like spending the holidays with your first grandchild, so I’m still stoked. Then again, I’m always optimistic — albeit sometimes cautiously so — as we enter a new year, aware of the threats but excited about the opportunities. I think most REALTORS^® share those feelings. So, let’s take a quick inventory of where we are and where we’re going.

Based on data and analyses by economist David Clark of Marquette University for the WRA, Wisconsin’s housing market enjoyed a very good year in 2015, with sales of existing homes growing at double-digit rates. Sales for the first 10 months of the year were up nearly 12 percent, and median prices were up nearly 6 percent. If that pace holds through year-end, sales volume for the year will exceed 75,000 units, which is the highest number of annual sales totals since 2005.

This healthy market is being fueled by historically low interest rates for 30-year fixed-rate mortgages, which is just a half percent higher than the 44-year low of 3.35 percent in late 2012, along with continued affordable prices, even though prices have been rising above the near-zero inflation rate. The market has also been supported by an increase in private sector employment in Wisconsin, which has grown at an annual rate of 1.3 to 2.0 percent throughout 2015, which in turn helped push unemployment rates down to just 4.3 percent in October, a full 1 percent lower than October 2014. One dark side of this market, however, has been a shrinking supply of homes on the market, with just 7.5 months of inventory in October, down from 9.2 months last year, with a wide disparity between rural markets, which have over 12 months of supply, and metropolitan markets, which have just 5.6 months of supply. New construction, while up from lows in 2009, remains below pre-recession levels. 

As we enter 2016, markets will start by responding to the first increase in short-term interest rates in nine years by the Federal Reserve Board, from a rate of nearly 0 to 0.25 percent. This will likely increase mortgage rates and push potential buyers off the fence, one way — into the market to take advantage of still low rates, or the other — out of the market because their income no longer qualifies. 

Beyond the Fed, state and federal lawmakers could also have a direct and indirect impact on our markets, although the closer we get to the 2016 presidential, congressional and state legislative elections, the further we get from passage of meaningful legislation. Many in Congress still harbor dreams of significant tax reform in 2016, which could include major changes to the income tax deductibility of mortgage interest and state property taxes. Those potential threats at the federal level are offset by significant potential opportunities at the state level where legislators in Madison have the opportunity to:

• Modernize our license laws — including changes to limit broker liability, clarify independent contractor status of agents, codify the Dinger case for licensees to complete state-approved forms without lawyers, eliminate timeshare licenses and clarify dual agency.
• Ensure the right to rent private homes.
• Further protect landlord interests from unreasonable municipal regulations.
• Better protect private property rights by improving the regulatory environment at both the state and local levels. 

These and several other WRA-backed pieces of legislation are now pending in the state Capitol. And after Congress and the state legislature adjourn in the spring, we must all engage in the fall elections to ensure the election of candidates who will support issues important to homeowners, property owners and REALTORS^® next session and beyond. 

So we know interest rates will go up, but hopefully slow enough for markets to adjust without major disruptions. We know prices will rise, but hopefully not too much faster than incomes. We also know that despite these developments, NAR economists are predicting improved sales in 2016, with the following notes: Raising prices will help existing homeowners build equity, which could facilitate more sales; credit standards will gradually ease due to improving loan performances, resulting in more mortgage loans; new construction will pick up to meet rising demand; return buyers forced out of the market by foreclosures will be a new force in the market in 2016; and an increase in jobs nationwide will boost demand. NAR’s prediction: sales in 2016 will increase at least 3 percent.

Looking in the rearview mirror at 2015 and looking through the front windshield at 2016, things look pretty good, and we have ample reason to be optimistic. Now let’s do our part — in our markets, in our communities, in our elections — to ensure a successful and happy New Year. Hello, 2016!