After a prosperous 2014 that saw the housing market in the best shape it has been in since the crash nearly a decade ago, 2015 expects to be even stronger. If this coming year might find you in the housing market as a seller or a buyer, here are 5 predictions that you may want to keep an eye on.
1. The End of Foreclosures
After the housing bubble burst nearly seven years ago, foreclosures and short sales flooded the market. And while 2014 saw foreclosure inventories decrease by 30%, that number should be even bigger this year, bringing the amount of foreclosures to a normal level and essentially putting a close to the foreclosure crisis. This should go a long way in normalizing the market.
2. More New Homes
In 2014, construction on new housing units came in around 1 million, which actually isn’t that high. But that number should rise significantly in 2015. One of the reasons is a shift in focus. Last year, new building was centered around multifamily homes, but 2015 should see a large increase in single-family homes. Jonathan Smoke, Chief Economist at realtor.com says, “We are forecasting 16% growth in starts, driven now more by growth in single-family starts, which we are expecting to grow 21%.” In fact, the only thing that might put a ceiling on growth is the supply of labor and materials.
3. Millennials Joining the Market
The millennial generation (those born between 1981 and 2000) is actually a bigger group than the baby boomer generation. The older end of the milliennials are at the age now where they are beginning to get married, start a family, and the job market is helping make this possible. In 2015, about 65% of first-time home buyers will be from this generation. In fact, their impact on the market is really just beginning. In the next five years, roughly two-thirds of household growth will come from the millennial generation.
4. Credit Still an Issue
The one thing that might keep the millennials from buying as many houses as they might want, is the availability of financing. For the past four years, strict mortgage qualifications have kept many potential buyers from purchasing their first home with a bank loan. In fact, according to Smoke, “...at least 10% of current homeowners with mortgages would not qualify for a new mortgage today.” This trend is expected to continue into 2015. Smoke did note that if access to credit were to open up, it could make a big impact, essentially opening the market to up to as many 750,000 would-be home buyers.
5. Mortgage Rates on the Rise
One of the only downsides to the improved job market, is that it will inevitably cause mortgage rates to rise as well. The Federal Reserve has indicated that it will increase the federal funds rate which does not directly affect mortgage rates, but it will still have a substantial impact. While the Federal Reserve might not make this increase until 2016, Smoke has suggested mortgage rates will rise ahead of the federal rates, possibly increasing in mid 2015. “Our forecast for housing assumes the 30-year fixed rate will reach 5% by the end of 2015,” Smoke said.
While still relevant when looking at the big picture, these are predictions and trends at a national level, but really the housing market is a local one. If you are looking for a real estate professional in the San Diego area who is up to speed with the current market and has the experience required in the complex analysis that comes with buying or selling a home, please don’t hesitate to visit my website, https://carlosgsandiego.blogspot.com, or call me at 858-551-3380.