What challenges will the local, state and world economy see in 2016, and why?
Liz Brooks: We need continued improvement in job and wage growth in order for the housing market to continue to grow. We will see an increase in interest rates, but it should be at a slow and steady pace keeping rates affordable through 2016.
The Chicago property tax increase in the city may cause some temporary confusion and hesitation in the market, however even with the increase, property taxes in the city will remain more affordable than most of the surrounding suburbs. Buyers with school-aged children justify paying higher taxes in the suburbs for better schools. The city will need to improve its schools to compete in the long run.
Chris Coleman: As interest rates increase, the fiscal impact due to $20 trillion in federal debt will be significant.
Janet Owen: We have to solve the local, state and national debt and improve the economy in order to enable people to attain the American dream of homeownership.
Mike Golden: At the local and state level, the focus continues to be on solving the budget crisis, and as we’ve seen, many property owners and renters will have to share the burden. Globally, we’ve seen how slowdowns in major foreign economies can affect the equity markets at home. But we weathered some significant volatility this year, which has given people at home and abroad a level of confidence in the U.S. economy.
Laura Ellis: Job creation and consumer confidence will continue to be two aspects of our economy that I want to see increase in the upcoming year.
Keith Hancock: Locally: Increased regulation and taxation driven by cash-strapped local governments have been and will continue to be an issue for the real estate industry. Every year, Realtors are confronted by new ways that local governments are trying to use to siphon off yet more money from property owners. With median prices rising, the taxation issue may increasingly have more weight with consumers.
State: The Illinois budget issue is a lingering and increasingly damaging aspect of what we face in 2016. While cuts may seem incremental, the ripple effect of cutting daycare subsidies and other state services may begin to have a corrosive effect the longer this is allowed to continue.
The real issue is how Illinois is presented on a national/international stage. The budget issue is constantly in news stories about our state, and as a result the idea is fixed among many that we are hopelessly mired in a fiscal morass. This affects recruiting companies to the area, who are going to be concerned about the tax rate they might ultimately have to pay once they get here. It also affects public perceptions that people are trying to leave the state.
National: Interest rates may rise, although not at the rate that is seen as substantially damaging consumer demand for housing. More worrisome could be any proposed tax code change that would be sweeping, such as elimination of the mortgage interest deduction and/or the 1031 Exchange. It’s impossible to really know what impact a continuing slowdown in China, instability in the Middle East and international terrorism might play in the market, but all are specters that could impact consumer confidence.
David Hrobon: The big local issues are government deficits, pension reform, gun violence and job growth. Global issues are the health of the world economies, cyber security and terrorism.
Rebecca Jensen: I have some concern over the uncertainty in global markets due to the threats of terrorism. Any predictions made would be significantly affected by security concerns arising out of continuing occurrences.
Chris Feurer: The property tax hike will have a short-term negative impact. Over time this will subside. We will still be lower than most major metropolitan areas. The city and state budget shortfalls will continue to slightly hamper some of our recovery. Ultimately, Chicago has cemented itself as a leading city globally, and I expect to see sustained growth for the foreseeable future.
Jeanine McShea: Thanks to strong employment gains and wage growth, the U.S. housing market is on track to have its best year since 2007, despite lingering concerns about a slowdown in China and volatility in Europe. As prices continue to rise in 2016, more homeowners will be able to trade up, which could help first-time buyers enter the market, especially if there’s a loosening of credit standards. These same factors could also lead to more construction, easing supply constraints that have made affordability an issue for entry-level and middle-income buyers. Even if the Federal Reserve decides to raise short-term interest rates in December, we don’t expect the move to have much of a chilling effect on the market in 2016.
In Chicago, perhaps the biggest question is what impact, if any, the record property tax hike will have on local sales activity, but because homeowners will still be paying less in the city than in many nearby suburbs, we don’t see it as a big deterrent to buyers.
Leslie McDonnell: Increased interest rates, threats of terrorism and public safety will be the biggest challenges.