Louisville's Real Estate Outlook for 2016

The first two stages in the four stages of learning are: You don’t know you don’t know, and you know you don’t know. Knowing this, we can offer a little input to what is expected for the Louisville housing market this year.

Since inventory in Louisville isn’t available at every corner, it will probably be a sellers’ market. The absorption rate is measured by the rate at which available homes are sold in particular real estate marketing during a given period of time. You divide the total number of homes by the total number of sales for that month. The balanced market says the absorption rate is 6 months, and it doesn’t favor the buyer or the seller.

One main principle of economics is supply and demand, and in our case, if Louisville’s supply is low, the prices are higher. This does not account for homes hitting their appreciation limit. Homes are supposed to rise 3% in the next two years, but that all depends on the state of the national economy.

In December of 2015 the FED raised interest rates, which is a strong sign that the historically low interest rates are behind us. We surely don’t expect the rates to rise sky high, but most experts believe the rate will increase a quarter of a point every quarter, making it rise one point for the year.

This year’s housing market will largely depend on three groups, millennials, GenXers, and older baby boomers. The millennials make up a third of all home buyers, and they will continue to hold their place as a significant part of the conversation. The GenXers are entering the point in the lives when they are making real money, enough that they can afford big items. The older baby boomers are approaching, and some have hit, retirement. This group is looking to downsize and reduce their monthly expenditures.

We cannot separate the local housing market from the local economy holistically, because one is a significant part of the other. The positive side is that Ford is adding 2,000 jobs, the food and restaurant business is booming in Louisville, and entrepreneurship in Louisville is at an all-time high. On the other hand, Humana is merging with Aetna, and GE appliances stopped its agreement to be sold to Electrolux. 

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