To buy, or not to buy… that is the question. With 2015 now underway, many buyers and sellers may have questions about this year’s upcoming real estate market. Although the real estate industry will always be somewhat unpredictable, our team at Dani Beyer Real Estate set out to find out the facts and figures about where the market is heading for the year. And undoubtedly, good things are happening.
Here’s what to expect in the 2015 real estate market:
1. More First Time Buyers
Fannie Mae and Freddie Mac recently rolled out a mortgage option that allows for a 3% down payment. If conventional lenders get on board, the new low-down-payment option could pull more first-time buyers into the marketplace. During a time of tight credit and stagnant wages, this crucial group of buyers has been all but absent from the housing picture. “If access to credit improves, we could see substantially larger numbers of young buyers in the market,” says Jonathan Smoke, Chief Economist for realtor.com (Time Magazine).
2. Price Boosting by Millennials
For the past decade, the largest portion of the American population was made up of Baby Boomers, folks who long ago settled down and started families. But late last year, the Census Bureau announced that the cohort of now-23-year-old Americans is the largest in the country (The New York Times). As this ascendant generation ages another year, more of them will start to look and buy homes of their own. Jonathan Smoke, Chief Economist for realtor.com, argues that this generation will “drive two-thirds of household formations over the next five years” (Fortune Magazine). Millennial generations presence will be truly felt this 2015.
3. Home Price Increases Will Decelerate
Home prices in October 2014 were up by 6.4% year-over-year, after climbing 10.6% in 2013. Economists polled by Fortune Magazine were nearly unanimous in predicting that home values would continue to rise, but even slower than they did this year. That’s because the rebound from the bursting of the housing bubble has just about run out of steam, with Trulia estimating that homes are only 3% undervalued relative to fundamentals nationally. Surveys of homeowner sentiment suggest that more of them will look to sell their homes next year, putting more downward pressure on prices.
4. Closing Out the Foreclosure Crisis
It’s been 7 years since the housing bubble burst and foreclosures skyrocketed, but in 2015 we’ll see the end of that era. Already this year has seen a major improvement in the composition of sales – that is, there are fewer foreclosures and short sales in the mix. “We are on pace for foreclosure inventories to end 2014 down more than 30%, and next year should see a slightly greater decrease as foreclosures fall to normal levels,” Smoke said (Market Predictions).
5. Increase in Home Building
Although total housing starts (construction on new housing units) barely broke 1 million in 2014 and was driven by multifamily homes, Smoke noted the pace will pick up in 2015 and shift in focus. “We are forecasting 16% growth in starts, driven now more by growth in single-family starts, which we are expecting to grow 21%,” he said. But shortages of labor and building product material will limit further growth in single-family construction and will keep overall supply tight. “The constraints on new construction supply factor into our assumptions about existing home sales growth and overall tight supple of homes for sale,” Smoke added.
Builders agree. The National Association of Home Builders predicts a 24.3% increase in new home construction; a total increase of 547,000 sales. David Crowe, Chief Economist of the builder’s group, adds, “I’m confident that the demand is out there. But I realize every day that it’s going to take more for potential buyers’ confidence in the marketplace to put them in the buying mood” (The Wall Street Journal).
6. Credit Will Continue to be a Major Factor
Strict mortgage qualification standards are keeping many consumers, especially younger ones, from buying a home with a bank loan. Although it’s possible that various new federal housing policy initiatives might help loosen those standards in 2015. Opening up access to credit would be a game changer in the housing market, allowing 500,000 to 750,000 would-be buyers who are now cooling their heels to achieve the dream of homeownership (Market Predictions). Be sure you are working with an experienced loan officer who understands credit and can advise you best on your situation. We recommend Meggan McDonald with Supreme Lending for these options.
We’re confident that the New Year will be better than the last. Interested in buying or selling? Contact our team at Dani Beyer Real Estate for a no-obligation consultation – Now may be the time! As always, we appreciate referrals from our friends and past clients. If you know of anyone who is looking to buy or sell real estate this year, please send them our way! Happy House Hunting!