Buying a home in the Puget Sound area beats renting in less than two years, according to anew study. The “breakeven horizon” – the number of years after which buying is more financially advantageous than renting – is 1.9 years.

Why the short timeframe?

Interest rates are at historic lows. (But experts expect them to rise soon.)

Rents are at record highs.

If you paid the average cost of monthly rent towards a mortgage payment instead, here’s what you could buy:
Based on principal & interest on a 30 year mortgage at 4% interest with 0% down.

Are you ready to invest the money you spend on rent to buy a home?

Get in touch with Oscar and Nancy so we can help you take advantage of the “breakeven horizon” and turn your monthly rent into a mortgage payment!

The National Economic Forecast

1. The U.S. will continue to expand with real GDP growth of 2.3% in 2016.

Although a positive number, the forecasted rate of growth suggests that we will be modestly underperforming in 2016.  On a positive note, oil prices are likely to remain well below long-term averages, which puts more money into consumers’ pockets in terms of disposable incomes.  However, I believe that consumers are likely to continue to save rather than spend which will constrain growth.  That said, there is certainly no recession on the horizon – at least not yet – and a strong dollar will act as a bit of an anchor.

2. Employment will continue to expand but the rate of growth will slow. Look for an increase of 1.6% in 2016.

We are rapidly approaching full employment (generally considered to be when the unemployment rate drops below 5 percent).  As such, growth in employment has to be driven more by population growth rather than a return to employment. 2015 saw an average of around 210,000 jobs created per month and I believe that this is likely to slow to an average monthly gain of 190,000 new jobs.

3. The U.S. unemployment rate will continue to drop and end 2016 at 4.8%.

As mentioned above, we are heading toward full employment and, as such, the national unemployment rate cannot trend much lower.  That said, the less acknowledged U-6 rate (which includes those working part-time and those marginally attached to the workforce) will remain elevated at around 8%, signifying that there is still some slack in the economy and room for the rate to drop a little further.

4. Inflation will remain in check with the Consumer Price Index at 1.9%.

The Federal Reserve has begun the long-awaited tightening of monetary policy and we will likely see the Fed Funds Rate continue to move higher over the next two years. Inflation has yet to respond to the low unemployment rate, but it will.

The core rate of inflation should remain in check and the overall rate could stay below long-term averages as a function of stubbornly low energy costs. Should we see a shift in OPEC’s position relative to oil supply, the overall rate of inflation could rise more rapidly.  Oil prices, therefore, will remain in focus during 2016.

The National Housing Market Forecast

5. Mortgage rates will rise, but we will still end 2016 with the average 30-year fixed rate below 5%.

I am taking the Fed at its word when it says that monetary tightening in 2016 will be gradual and heavily data dependent. Accordingly, I expect only a modest uptick in long-term rates in 2016. Furthermore, as long as the Federal Reserve continues to reinvest the dividends that it is receiving from their bond holdings – which is highly likely – the yield on the key 10-year treasury will remain low and hold mortgage rates in check. This is only likely to change after the general election, therefore suggesting that rates will remain very attractive relative to their long-term averages.

6. Credit Quality – which had been remarkably stringent – will relax a little.

Access to credit, specifically mortgage instruments, has not been easy for many would-be homebuyers but that is set to change. I believe that we will see some improvement, specifically for borrowers with “near-prime” credit. This will be of some assistance to first-time buyers; however, credit quality will still be higher than it needs to be.

7. Existing home sales will rise modestly to an annual rate of 5.53 million units with existing home prices up by 4.7%.

I anticipate that we will see some improvement in overall transactional velocities in 2016, but unfortunately, demand will still exceed supply. Prices will continue to rise, but at a more constrained pace than seen over the past few years. This will be a function of modestly rising interest rates as well as slightly improving levels of inventory. I anticipate that we will see more listings come online as more households return to positions of positive equity in their homes.

8. New home sales will jump and be one of the biggest stories for 2016.  Look for a 23% increase in sales and prices rising by 3.4%.

I believe that builders will start to build to the entry-level buyer, filling a huge void.  Additionally, I see the total number of new home starts increase quite dramatically in 2016 as banks start to ease lending and builders start to believe that the downward trend in homeownership has come to an end.  This will help to absorb some of the pent-up demand currently in the market.

9. Foreclosures will continue to trend down to “pre-bubble” averages.

Any story regarding foreclosures will be a non-story as the rate will continue to trend down toward historic averages. However, we will see the occasional uptick as banks work their way through their existing inventory of foreclosed homes. Move along.  There’s nothing to see here.

10. The Millennials will start to enter the market.

There are several substantial reasons to expect an increase in Millennial buyers. Firstly, early Millennials are getting older and starting to settle down, and even with modestly higher mortgage rates, rents are likely to continue to trend upward, and this will pull many into homeownership.

Secondly, more favorable mortgage insurance premiums, additional supply from downsizing boomers, and growing confidence in the housing market will lead to palpable growth in demand from this important – and substantial – demographic.

To conclude, it appears to me that 2016 will be a year of few surprises – at least until the general election! Because it is an election year, I do not expect to see any significant governmental moves that would have major impacts on the U.S. economy or the housing market.

Matthew Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has over 25 years of professional experience both in the U.S. and U.K. 

We're nearing the end of the year and everyone is sharing their predictions and hopes for real estate in 2016. According to Realtor.com, here are the top five trends that will be shaping real estate next year. The economy, rental market, and housing market are all changing in the Seattle area and its Eastside. These trends are definitely something you want to pay attention to as we jump into 2016.

Five Real Estate Trends in Real Estate in 2016

1. We'll Return to Normal

Something that we in the Seattle area are eagerly anticipating! The year ahead will see healthy growth in home sales and prices, but at a slower pace than in 2015 according to Realtor.com. "Distress sales will no longer be playing an outsized role, new construction is returning to more traditional levels, and prices rise at more normal rates consistent with a more balanced market."

2. The Best Year to Sell

We all knew that millennials would make a huge impact in 2015, and they did. Millennials emerged as a dominant force in 2015 and represented almost 2 million sales. That's more than one-third of the total! "This pattern will continue in 2016 as their large numbers combined with improving financial conditions will enable" them to jump into the market again. Financially recovering Gen Xers and older boomers who are thinking about retirement are also going to affect the market. According to the article, since "most of these people are already homeowners, they'll play a double role, boosting the market as both sellers and buyers."

For more information, read the full list on Realtor.com.

This article originally appeared on Inman.com 

After seven years of some of the lowest interest rates in recorded history, the Federal Reserve has decided to raise the key Fed Funds Rate by 0.25 percent, which is causing some to be concerned that it will lead to a jump in mortgage rates and negatively impact the US housing market.

So, the question everyone wants to know is, do we need to worry about interest rates leaping?

While I expect there to be some volatility in rates for a while, I don’t believe the real estate market will implode in a rapidly rising interest rate environment. So, yes, interest rates are going to rise modestly, but no, I don’t think we need to be overly worried about it.

To qualify this statement, we need to understand that mortgage rates do not run in “lock-step” with the Fed Funds Rate. Although the Fed Funds Rate is a bellwether for the greater economic environment, there have been times when these two rates have moved in opposite directions, such as we saw in 2004/2005.

It’s also important to understand that while interest rates for revolving credit, such as credit cards and home equity loans, are tied to the Fed Funds Rate, non-revolving loans – like mortgages – are not. Mortgage rates are tied to bond yields – specifically the 10-year treasury.

So what do I think will happen?

I believe interest rates will rise above 4 percent, but we will not see a sharp spike in rates. The Fed has stated that any upward movement in the Fed Funds Rate will be slow and steady, and will reflect the greater economy. And I believe that mortgage rates will follow suit.  Additionally, mortgage rates have already moved higher in anticipation of an increase in the Fed Funds Rate.

That said, it is worth noting that any weakness in the global economy can actually have a downward effect on interest rates. This is referred to a “flight to quality”. In essence, investors seek safe haven during times of economic uncertainty. If markets outside the U.S. continue to underperform, there will likely be increasing demand for bonds which will drive up their price and drive down interest rates. Between China, the Eurozone, war in the Middle East, and a massive drop in oil prices, it's certainly possible that the price of mortgage backed securities could rise, leading U.S. mortgage rates lower.

Interest rates could not realistically stay at their current levels forever. But an increase should not be a great cause for concern. Yes, an increase makes mortgages more expensive, but not to a point where they will have a negative effect on home values. That said, the rate of home price growth will undoubtedly slow in the coming year, but that isn’t necessarily a bad thing.

A little perspective might help: the average rate for a 30-year loan in the 1970’s was nine percent. It was 13 percent in the 1980’s and eight percent in the 1990’s. And yet people still managed to buy and sell homes throughout those years. With that in mind, the rate increases we’re likely to see in 2016 are nothing to fret over.

The increase in the Fed Funds Rate should be taken as a sign that our economy is expanding and is a preemptive move to limit anticipated inflation. While interest rates have risen from their all-time low, they are still remarkably favorable. And will remain so through 2016.

Matthew Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has over 25 years of professional experience both in the U.S. and U.K.