CoreLogic is projecting rising home sales, prices and rent in the new year, while vacancy rates will remain low, according to the company’s 2016 housing forecast.

Dr. Frank Nothaft, senior vice president and chief economist at CoreLogic, reports the prediction that the following five features will be present in the new year’s housing market:

• Interest rates with gradually rise.
• Household formations will increase the need for housing.
• Rental homes will continue to be in high demand.
• Home sales and prices will likely increase.
• The dollar volume of single-family mortgage originations will fall approximately 10 percent.

Homeowners with adjustable-rate mortgages or home-equity loans will most likely see an increase in their interest rate due to the expectation that the Federal Reserve will raise short-term interest rates approximately 1 percent between now and the end of 2016. Fixed-rate mortgages will also likely rise, up a projected half percent between now and the end of 2016, eventually reaching 4.5 percent for 30-year loans. Mortgage rates, are however, expected to remain historically low despite this increase in interest rates.

More than 1.25 million new households will be formed in 2016, expected due to improvements in the labor market and lower unemployment rates. The new households are projected to increase housing demand, specifically in the rental market.

Rental vacancy rates are at or near their lowest levels in 20 years, as rents rise faster than inflation. High demand for rental apartments and houses will likely continue in 2016, especially among the newer and younger households.

Overall purchase demand may lift 2016 home sales to the best year since 2007. Nationally, home prices will likely rise at a quicker rate than inflation, but not at the same rate as last year. The CoreLogic Home Price Index showed a year-over-year increase of 6 percent in the last 12 months, although 2016 is only expected to see increases of 4 percent to 5 percent. The increase can likely be attributed to the improved economy, which has enhanced homeowners’ feelings of financial security.

The single-family mortgage origination decline is projected to occur despite the home equity lending rise and home purchase loan originations will likely increase about 10 percent in volume next year. The growth in those two areas is projected to be offset by a 34 percent drop in refinance, reflecting the higher mortgage rates and decreasing pool of borrowers with a strong financial incentive to refinance. While single-family mortgage originations are expected to fall, multifamily originations will likely rise, reflecting the higher property values and new construction that contributes to permanent mortgage usage.

“As we approach the start of 2016, the consensus view among economists is that economic growth will continue, and the U.S. will enter an eighth consecutive year of expansion in the second half of next year. Most forecasts place growth at 2 and 3 percent during 2016, creating enough jobs to exert downward pressure on the national unemployment rate,” Nothaft said in a statement.