2015 FORECAST: It’s a new year and the outlook for the housing market is definitely bright. 2014 was the best year in the U.S. economic recovery since the recession of 2008-2009, with an accelerating economy fueling job and income growth, and helping to bolster consumer confidence. It’s also been seven years since the housing bubble burst and foreclosures skyrocketed, but in 2015 we’ll see the end of that era.
Experts predict the prospects are very good for homeowners and would-be home buyers in 2015. Two factors may fuel an early start:
1. INTEREST RATES EXPECTED TO RISE:
The Federal Reserve has indicated it will increase the federal funds rate — which has an indirect but significant effect on mortgage rates — next year. The rate has remained near zero since December 2008, but Realtor.com Chief Economist, Jonathan Smoke, suggested the increase may come in mid-2015, and mortgage rates will increase ahead of the Fed’s move.
“Our forecast for housing assumes the 30-year fixed rate will reach 5% by the end of 2015,” Smoke said. ” The one-year adjustable rate will likely rise less if much at all, and accordingly, we are likely to see a shift into more adjustable and hybrid mortgages over fixed.” This should inspire a rush to buy this year, ahead of any increase.
2. THE MILLENNIAL GENERATION IS BECOMING AN ADDITIONAL FORCE IN THE BUYING POOL:
The Millennial generation (born 1981 to 2000) is beginning its ascent. About 65% of first-time home buyers are part of this older Millennial group (ages 25-34), and at an age when many marry and start families. This segment of the generation is adding to an already crowded buyers pool, and its numbers in the market will eventually be bigger than even the Baby Boom generation.
More than two-thirds of household growth in the next five years is expected to come from Millennials, according to Smoke, and the market is only beginning to feel its impact.
It is predicted the serious buyers across the board will hit the ground running early in January, ahead of the traditionally more competitive Spring and Summer, and while interest rates remain low. Prospects are very good for strategic homeowners and would-be home buyers.
