Housing analysts and economists have high hopes for 2015. The real estate market is expected to build momentum across the board nest year, mostly because of a strengthening economy.
Here’s a summary of some of the real estate forecasts for 2015:
- Millennial force: Younger professionals are having more luck in the job market, which is expected to help more of them jump into home ownership in the new year. Overall, employment is on the rise.
- Millennials — particularly those aged 25 to 29 — has risen by 3 percent.
- Mortgage rates rising: Don’t expect the low rates to stick around much longer. Mortgage rates are expected to rise next year. Freddie Mac projects mortgage rates will likely average 4.6 percent but inch up to 5 percent by the end of 2015.
- Return of the 3 percent down payment: New programs are popping up to help more buyers break into home ownership with lower down payments. In early December, Freddie Mac and Fannie Mae announced conventional loan down-payment programs that will allow qualified first-time buyers to secure a fixed-rate mortgage with a 3 percent down payment.
- Housing affordability declines: Affordability for homes, based on home-price appreciation and rising mortgage interest rates, will likely fall by 5 percent to 10 percent in 2015, according to realtor.com® forecasts. However, the decline in affordability could be offset by an increase in salaries next year for many households.
- New-home sales rebound: Sales of new homes are expected to rise 25 percent as single-family construction picks up traction in 2015. The National Association of REALTORS® projects single-family housing starts to rise to 820,000 in 2015, which is still below the 1 million historical average.
- Foreclosures recede to pre-recession levels: The number of foreclosures is expected to continue to fall in 2015, but expect them to still be elevated in some pockets across the country — particularly in judicial states where foreclosures must wind through the courts. Foreclosures will likely fall to pre-crisis levels in 2015.
- Drop in oil prices will boost housing: Oil prices have plunged 45 percent since June, which could inadvertently provide a lift to the housing market.
- Rent rises to outpace home-value growth: Rents likely will continue to rise in the new year, and an increase in rental costs in 2015 could outpace annual home-price gains. Expect the rental market 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®.
- Stronger economy leads to greater confidence: A stronger economy will likely lead to more demand for housing in 2015. “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,” said Sam Khater, Deputy Chief Economist at CoreLogic.
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