Predictions Positive for Real Estate in 2015

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PORTLAND, ME – A strengthening economy is likely to provide a shot in the arm to the real estate market this year according to analysts.

The early indications are with interest rates maintaining an historically low status and some added solidity in the jobs arena they may just be right.

Here’s a round up of predictions for 2015 that – if accurate – will have a generally positive impact on the housing market:

1) The Millennial force: An increasingly healthy jobs market for young professionals are likely to see more “twenty somethings” jumping into home ownership in the new year. The jobs numbers have been improving across the board and has risen by 3% in the Millennial age bracket which is one percentage point above the rate nationally. Millennials are expected to drive two-thirds of household formations over the next five years, according to some forecasts. The predicted addition of 2.5 million jobs over the next 12 months, coupled with an increase in household formation, will likely see more first-time home buyers hop on the property ladder, according to realtor.com® projections.

2) Home prices stabilize: Home prices are expected to continue to rise in 2015, with realtor.com® predicting a sustainable 4.5 percent gain following on from last year’s slowing in the trend in appreciation seen in 2013.  “After two years of abnormally high levels of home-price appreciation in 2012 and 2013, price increases moderated throughout 2014,” realtor.com® notes in its 2014 Housing Review. “We are now experiencing increases in home prices consistent with long-term historical performance.”

3) Rising mortgage rates: Interest rates have continued to remain low and indeed dipped below 4 per cent in recent months which in turn have kept mortgages affordable for buyers. The prediction is, however, that rates will rise in the coming year. Freddie Mac’s projection is rates are more likely to be in the region of 5% by the end of the year.

4) Return of the 3% down payments: New programs offering lower down payments helping more buyers enter the market have started to pop up giving borrowers a boost. In early December, Freddie Mac and Fannie Mae announced conventional loan down-payment programs allowing qualified first-time buyers to secure a fixed-rate mortgage with 3 percent down, previously it had been 5 percent.  “There are many states as well as national programs, which offer grants that range from 1 to 5 percent to be used for a down payment or closing costs,” adds Damian Maldonado, co-founder of American Financing Corp., at CNBC. “These easing loan standards will allow more first-time buyers to enter the market.”

5) Declining housing affordability: The affordability of homes, based on sale-price appreciation and rising mortgage rates, will likely fall by 5 percent to 10 percent in 2015, according to realtor.com® forecasts. On the flip side any decline in affordability could well be offset could by rising salaries and household incomes in the coming months. “When considering historical norms, housing affordability will continue to remain strong next year,” realtor.com® continued to note in its report.

6) A rebound in new-home sales: Construction of new single family homes is expected to pick up significantly in 2015 after a period of relative stagnation in the last two years or more. New home starts are predicted to increase by 25% this year, although the 820,000 new-starts projected by The National Association of REALTORS® still falls well below the 1 million historical average. Despite a slowing of new home sales at the back end of 2014 builders remain generally optimistic buoyed up by the strengthening economy. “As the labor market and broader economy continue to strengthen, we can expect the housing sector to gain momentum heading into next year,” says David Crowe, chief economist for the National Association of Home Builders.

7) Foreclosures dip to pre-recession levels: The number of foreclosures is expected to continue to decline in throughout this year, but it’s expected they will still be elevated in some pockets across the country — especially in judicial states where foreclosures must work through the court system. Foreclosure filings were on the decline for most of last year, according to RealtyTrac data. The only uptick has been in foreclosure auctions but foreclosures in general will likely fall to pre-crisis levels in 2015, Daren Blomquist, vice president of RealtyTrac predicts.

8) Falling oil prices, good news for housing: Oil prices continue to plunge into the new year, which could inadvertently provide a lift to the housing market. “Households in the U.S. spend more than $1,800 on energy-related costs annually, and 22 percent of that energy consumption is due to residential real estate,” according to CoreLogic’s 2015 Housing Outlook. “So while the drop in oil prices typically has been linked to a reduction in driving-related expenses, it clearly also reduced energy-related expenses for residential real estate.”

9) Rent rises to outpace home-price growth: Rents are expected to continue to rise in 2015, some much so that rental costs could outpace annual home-price gains. It’s likely to remain a “landlord’s market” in 2015, with vacancy rates expected to stay below 5 percent in the new year, according to the National Association of REALTORS®. The principles of demand and supply further support the theory of rising rents keeping them above inflation, notes NAR Chief Economist Lawrence Yun. Apartment rents are predicted to increase by over 4% this coming year.

10) Stronger economy = Growing confidence: The strengthening economy will undoubtedly lead to increased demand for homes. “Overall, the economy finally appears to be gaining enough momentum to help provide the support that the housing market has needed for stronger recovery,” Sam Khater, deputy chief economist at CoreLogic, notes in the company’s 2015 Housing Outlook. “The combination of stronger employment growth and especially Millennial job growth makes for solid footing for the real estate market. Moreover, the recent drop in oil prices cannot be overstated, because not only does it directly lower the transportation and home energy costs for households, but it also improves consumer confidence. And confident consumers are more likely to spend on big ticket items, which is sweet music to the ears of the real estate market.”

If you are considering buying a home now or planning to in the near future call today to book a VIP Buyer Program consultation. This informal, no-obligation meeting will provide a valuable insight into the home buying process and equip you with a strategy to ensure you secure the home your looking for at a price that is right for you. Call today on 207-553-2662 or email trubritrealty@gmail.com to learn more about our VIP Buyer Program.  Visit www.TruBritRealty.com to view our Buyer Resources. 

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