US first time home buyers likely to become more active in 2016

In US, the borrowing costs are likely to remain low, with the rise in Fed funds rate, which is likely to have modest impact on fixed term mortgage rates.

US benchmark 10-year Treasury note yield used to price 30-year mortgage rates is likely to be just 0.2 pct points high by end of 2016. Most of the improvement moving ahead reflects on first time home buyers, for whom it should be fared slightly better. They continue to face many headwinds like low inventory of affordable houses, relatively tighter mortgage standards, elevated debt burdens.

"Still,home ownership rate among people age 35 or less has perked up over the last two quarters alongside increased household formation. As young people increasingly begin to form previously delayed households, supported by improving economic fundamentals, first-time homebuying should become more active in 2016", says Economics TD.

Transaction activity would be continuously hindered by inventory shortages, number of houses and condos on the market fell 5% when compared to an year ago, and it is around 10% below the 2001-05 period average.

The rising homebuilding should support to reduce supply hurdles, although slowly, in subdued pace of homebuilding. This is particularly correct for the single-family homes at a low end of price range.