Many people, Buyers and Sellers alike want to know what the housing market is going to do in 2015. Realtor.com has just released their 2015 Forecast, and here are the main things you need to know, broken down as far as what they mean to you:
Top 5 Housing Predictions for 2015
1. Millennials Will Purchase More Homes: Defined “adult Millennials” are those who are 18 to 35 years old. Both population and households have grown at a slightly higher pace in 2014 and this trend will continue in 2015 with modest improvement over this year’s increases. Households headed by millennials will see significant growth as a reflection of economic gains. They will account for 65% of first time homebuyer sales in 2015.
2. Existing home sales will increase +8%: Existing home sales will grow as more buyers enter the market motivated by a clear belief that both rates and prices will continue to rise. The increase in home sales year-over-year will be similar to 2012, but this time the composition of properties sold will be more normal with minimal levels of distressed properties. If you’ve been on the fence about buying, you may want to do so now before we see that 8% increase begin.
3. Home prices will gain +4 to 5%: Low inventory levels and demand driven by improved employment opportunities will push home prices up next year. Many Sellers are waiting to see how much prices will increase in our area before they list their homes. However, keep in mind, if you are selling, and then buying another home with a new mortgage, it may be smarter not to wait for a 4% increase because interest rates are expected to rise, and you’ll lose more by having a higher interest rate on the new loan that you would earn by waiting for your home’s value to increase 4%.
4. Mortgage rates will end the year at 5%: Mortgage rates will increase in the middle of 2015, as the Federal Reserve increases its target rate by at least 50 basis points before the end of the year. Thirty year fixed rate mortgages will reach 5 percent by the end of 2015. One year adjustable rate mortgages (ARMs) will rise minimally. Lower ARM interest rates will influence an uptick in buyer interest for adjustable and hybrid mortgages. While still at historic lows, rate increases will affect housing affordability for first-timers trying to break into the housing market and will be another factor pushing them to less expensive locales.
5. Home affordability will decrease 5-10%: Affordability will decline in 2015 by 5-10%, based on home price appreciation and increasing mortgage interest rates. This decline will be somewhat offset by increasing incomes. When considering historical norms, housing affordability will continue to remain strong next year.
If you are waiting to buy a home – don’t wait! Prices will increase and interest rates will go up. The days of tons of foreclosures are gone.
If you are waiting to sell your home, but have to buy a home too, don’t wait, prices and interest rates (over a 15 or 30 year loan) will go up and will negate any amount you’d hope to save by a 4% price increase. You are better to list now while inventory is low, get a great price on your home, but also take advantage of lower interest rates (currently in the 3-4% range depending on your credit score).