The National Association of Realtors has made some predictions, as have the economists at Core Logic.
NAR predicts that:
Mortgage rates will rise, but even after an increase, rates will remain low compared to the rates we saw early in this century. The forecast is for the 30-year fixed rate to reach 5% by the end of 2015 or early in 2016. Since they believe that adjustable rate mortgages will see little, if any change, they predict that we’ll see more adjustable and hybrid mortgages.
Millennials will buy homes. This has been predicted before and didn’t come to pass. However, economists believe that millennials are now looking at an improved jobs outlook, and thus will begin buying. The older millennials – aged 25-34 are starting families and not only moving out of family homes, but looking for stability that can’t be achieved through renting.
The drawback – many are still facing student loan debt along with limited credit histories and tough credit guidelines. Not everyone who wants to buy will be able to buy.
Housing starts will increase. Although new home builders are still being conservative, NAR predicts that starts in the single-family sector will increase by 21%.
What about price? The economists at Core Logic point out that new-home prices have risen far more than existing-home prices, and they expect that to level out. In past years, the difference was about 15%. Now a new single-family home can be expected to cost 38% more than an existing home. They believe this gap is unsustainable, so are looking for new home prices to stay flat in 2015 and fall 2% in 2016. Thus, existing home prices will eventually “catch up.”
Credit will continue to be difficult. Many are hoping that new Federal policies will relieve the situation, but for right now, underwriting guidelines are still tight. According to NAR, if you look at credit scores, at least 10% of the people with current mortgages would not qualify for a new loan today.
The foreclosure crisis will come to an end. For the past seven years, foreclosures and short sales have dominated the market. The numbers dropped in 2014 and NAE predicts that they will continue dropping.
However – others are looking at the fact that many thousands of adjustable rate and interest-only mortgages will reset this year. That could signal a new round of both foreclosures and short sales.
Home price increases will slow. The rapid increases through 2012 and 2013 had many worried that we were heading into a new bubble, but the 2014 increase of around 6% largely put that fear to rest. Depending upon which economist you listen to, home prices nationwide are expected to rise from 3% to 6% in 2015.
NAR also named the top ten metro areas to watch for household growth in 2015, and Texas took two of those slots.
Dallas-Fort Worth-Arlington came in first in forecasted household growth over the next five years. The volume of home sales is expected to rise by 7 %, largely due to Dallas’ strong employment rate. Home prices here are expected to rise by 3%.
Houston-The Woodlands came in 3rd in forecasted household growth, as already strong employment is expected to increase by 4% – or twice the national rate. Prices here are already higher, so while the volume of homes sold is expected to increase by 5%, the expected price increase is only 2%.
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