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State of the market

Forbes Magazine, that guru of money, has recently issued a roundup of real estate realities for 2015. Rather than re-invent the wheel, this week I am presenting their insights to you in a deconstructed and simple format. Here we go:

An overview: Real estate has stabilized – yay! After years of roller coaster values, we have arrived at a kind of normalcy. This is good news. Another 10 expectations for the year follow:

1. Slow gains: As investors looking for quick returns have left the market, prices have settled. Forbes reports that prices are back to 2005 levels, and the top 20 cities are about 15-17 percent off the highs in mid-summer 2006. Zillow is predicting a very slim rise of about 2.5 percent in 2015.

2. Affordability Slippage: Though prices may have slowed, wages are even slower. Realtor.com predicts a decrease in affordability between 5 and 10 percent this year. As mortgage rates rise, the gulf between income and cost will widen further.

3. No more buying frenzy: In 2013, investors accounted for 19 percent of sales; the latest numbers show a slip to 15 percent. With a smaller market this year, there’s less competition, and higher inventory. So shopping should be a lot less stressful for home buyers this year.

4. Interest rates on the rise: After several years of crunchingly low mortgage interest rates, most experts expect a short-term fund rate hike and the concomitant rise in mortgage interest rates. They easily go over 5 percent.

5. Millennials entering the market: Millennials (folks under 35) are increasingly becoming the largest group of home customers, overtaking Gen Xers (35-50). Millennials have been slower to marry than previous generations, and the late coupling translates into fewer home purchases. But they’re getting old enough now, and this segment is coming on full force.

6. Rent increases: Many of the millennials are still renting. As they save for down payments, the increase in renters has driven rents higher. Of course, as rents soar, buying will look ever more tempting, shifting the market into sales.

7. Push in multi-family: As rents rise, building multi-family structures is that much more alluring to developers. 2014 saw a boom in multi-family construction and this is likely to continue into 2015.

8. Cheaper homes: The gaps in income and home costs have encouraged builders to push down the cost of homes by lowering prices on new homes. Sales of these lower priced properties are also aided by relaxed standards by lenders, after several years of hard scrutiny by banks.

9. Foreclosures continue to drop: In 2015, finally the number of annual foreclosures is dropping to pre-crisis levels. There’s still a backlog of homes going through the process, but new additions are receding.

And finally, 10. The state of the economy, and particularly, the individual local economies, are determining prices rather than national “crash” conditions. We’re returning to more normal conditions, and slower patterns of rise and fall. The news is pretty good, and those of us in the real estate market –buyers, sellers and banks, can finally take a breath. At least for now!

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Posted by on Aug 6, 2015. Filed under Real Estate. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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