By Clark Kendus
With mortgage lending at 1998 levels Jane Fraser, Chief Executive Officer for U.S. Consumer & Commercial Banking with Citi, a mega player in the mortgage industry, characterized the housing market as “stagnant” and “not a vibrant sector”. She discusses the state of the market in this interview with CNN Money.
Wallingford PA Real Estate – Wallingford, PA 19086
It is that time of year when predictions on the factors that will drive the housing market in the upcoming year and well as market growth and metrics for 2015 are publicized. Realtor.com®’s Top 5 Housing Predictions for 2015 were released last week and here they are:
Millennials Will Drive Household Formations:
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. Millennials will also drive two-thirds of household formations over the next five years. Next year’s addition of 2.75 million jobs and increased household formation will be the two key factors driving first-time buyer sales.
Existing Home Sales Will Increase By 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. While the majority of housing activity next year will be driven by baby boomers preparing for retirement, millennials will account for 65% of first-time home buyer sales in 2015.
The National Association Of Realtors (NAR) has forecasted a growth of 5 – 7% in existing home sales.
Home Price Will Gain 4 To 5%:
Low inventory levels and demand driven by improved employment opportunities will push home prices up next year. While first-time home buyers have many economic factors working in their favor, increasing home prices will make it more difficult to get into high priced markets such as San Francisco and San Jose, Calif. As a result, first-time home buyer activity is expected to concentrate in markets with strong employment and affordability.
The National Association Of Realtors (NAR) has forecasted a growth of 3 -4% in home prices.
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% 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.
There is a strong consensus that mortgage rates will rise from their present levels around 4% to higher levels by the 4th Quarter of 2015. Some other predictions:
Fannie Mae – 4.7%
Freddie Mac – 5.1%
Mortgage Bankers Association – 5.1%
National Association Of Realtors – 5.4%
Home Affordability Will Decrease By 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.
Wallingford PA Real Estate – Wallingford, PA 19086
Apartment rents have risen nationally for 23 straight quarters and are 15.2% higher than they were at the end of the recession in 2009. The figures suggest the five-year squeeze on renters shows little sign of easing. Renting is becoming increasingly more expensive across the country, evidenced by this infographic from Zillow:
The National Association Of Realtors (NAR) conducts an annual survey of home buyers and sellers evaluating the demographics, preferences, motivations, plans and experiences of recent home buyers and sellers. The 2014 Profile Of Home Buyers And Sellers survey was conducted with recent buyers and sellers who bought or sold a home between July 2013 and June 2014. NAR sent out over 72,000 questionnaires in order to compile the data in the survey
Some highlights from the recent 2014 NAR report.
– 33% of recent home buyers were 1st time buyers, trending down from the historical norm of 40%
– First time home buyers averaged 31 years of age – repeat buyers were 53 years old on average
– Median income of buyers was $84,500. The median was $68,300 for 1st time home buyers, and $95,000 for repeat buyers
– 65% of recent home buyers were married
– The typical buyer searched for 10 weeks for a new home, and viewed 10 homes
– Homes purchased averaged 12 miles from past residences, with 50% being located in the suburbs and 16% in urban areas
– 88% of buyers financed their recent home purchase with an average of 10% down
– 12% of al buyers cited saving for a down payment as the most difficult task in the purchasing process
– New homes accounted for 16% of purchases
– The typical home purchased was 1,870 square feet in size, built in 1993, had 3 bedrooms and 2 baths
– 79% of the homes purchased were detached single family homes
– Buyers expect to live in their home for 12 years after buying
– 79% of buyers believe their home is a good financial investment
– 40% of sellers traded up to a larger size, 47% bought a higher priced home, and 53% purchased a new home
– The typical seller lived in their home for 10 years. In 2007 the typical tenure was only 6 years
– Sellers typically sold their home for 97% of the listing price, and 45% reduced their price at least once
– 17% of sellers delayed selling their home because the value of their home was lees than the mortgage owed
– 36% of sellers offered incentives to buyers, such as seller assists and home warranties
– 9% of home sellers were For Sale By Owners (FSBOs) – on average they sold their homes for 13% less than an agent assisted home sale
Wallingford PA Real Estate – Wallingford, PA 19086
Mortgage professionals attending the New England Mortgage Banking Conference last week heard some encouraging news from Freddie Mac’s Chief Economist Frank Nothaft, who predicted that the housing market will pick up in 2015. In fact, Nothaft feels that 2015 will likely be the best year for home sales since 2007.
This sunny forecast is based on strong buyer affordability in many areas, as well as the expectation of rising home prices that will cause more sellers to put their homes on the market. In addition, it is anticipated that the overall economy will strengthen, leading to increased consumer confidence and more household formation – both of which typically result in an improved housing market.
While confident in his belief that housing will strengthen, Nothaft also noted several challenges real estate and home financing professionals will face in the coming year. First is that mortgage rates will continue to slowly rise, hitting 5 percent by the end of 2015. This is still historically low, meaning the greatest impact of rising rates would be on the refinancing market. In addition, it is possible that student debt will continue to impact the ability for Millennials to be approved for a mortgage. As a result, this group, which still desires to own homes, may have to wait slightly longer to get into the market.
Wallingford PA Real Estate – Wallingford, PA 19086
