Business & Merchant

Last Updated on Friday, 30 January 2015 02:00

By Roger Dolanch, Broker/Owner

Housing analysts, economists and the real estate community at large have high hopes for 2015. The real estate market is expected to gain momentum this year for several reasons. Here are a few:

1. Millennial force: Younger professionals are having more luck in the job market, which is anticipated to be the driving force for them to become homeowners. Jobs for Millennials — particularly those aged 25 to 29 — has risen by 3% nationally. According to some forecasts, Millennials are expected to drive two-thirds of new household formations over the next five years.

2. Home prices stabilize: Home prices are expected to continue to edge up in 2015, with realtor.com® predicting a 4.5% gain.

3. Mortgage rates rising: Over the last several months we have seen interest rates dip below 4% for people with good credit scores. That lowered borrowing costs for both home buyers and homeowners seeking to refinance. However, we don't expect the low rates to last much longer. Freddie Mac projects mortgage rates will likely average 4.6% and possibly inch up to 5% by the end of 2015.

4. Return of the 3% 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 both announced conventional loan programs that allow qualified first-time buyers to secure a fixed-rate mortgage with as little as 3% down. Additionally, the FHA, VA and USDA loan programs all offer their own special low or no down payment programs too. The easing of loan standards across the board and offering a wider selection of loan programs will likely encourage more buyers to enter the market.

5. New-home sales rebound: National Association of REALTORS® projects single-family housing starts to rise in 2015 by an amazing 25%.

6. Foreclosures recede to pre-recession levels: The number of foreclosures is expected to continue to fall in 2015. Foreclosure filings were on the decline for most of 2014. Foreclosure filings fell about 172% nationally, compared to the same period during 2013, according to RealtyTrac data. There has, however, been a 5% increase in foreclosure auctions over one year ago.

7. Drop in oil prices will boost housing: Oil prices have plunged 45% since June! This inadvertently provides a "lift" to the housing market. While the drop in oil prices is typically linked to a reduction in driving-related expenses, it clearly also reduced energy-related expenses for residential real estate.

8. Rent rises to outpace home-value growth: Rents likely will continue to rise. An increase in rental costs has the potential to outpace annual home-price gains. Expect the rental market to become more of a "landlord's market" in 2015, with vacancy rates expected to stay below 5% in the new year, according to NAR.

9. Stronger economy leads to greater confidence: A stronger economy will likely lead to more demand for housing in 2015. "Overall, the economy finally appears to be gaining enough momentum to help provide the support that the housing market has needed for stronger recovery," says Sam Khater, deputy chief economist at CoreLogic. "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 a item, which is sweet music to the ears of the real estate market."