As we begin a second straight year with a southern migration of the “Polar Vortex”, we are left to wonder what to look for in the 2015 housing market. As it turns out, an erratic year might just lead to a new year of stability in the market, with some new twists.
In 2014, there were several seemingly contradicting indicators such as sales of previously-owned homes landing below the level sales were at during the same time in 2013 while new homes sales increased by almost 2%. However, accordingly to a recent report from Forbes, this is actually signaling a settling of a market that has been in rapid recovery since the housing bubble. While the settling might lower the freneticism some experience in the housing market, it might actually become more difficult for some.
Something that might be music to the ears of those looking to buy a home, whether new or previously-owned, is that prices will not rise as rapidly they have during the recovery. Prices nationwide are around where they were ten years ago. Realtor.com predicts a 4%-5% increase in home prices in 2015, while Zillow is more conservative, predicting ~2.5%. It should be noted that while prices increases are predicted to slow down in 2015, those increases will still likely outpace the rise in incomes, with Realtor.com predicting that 2015 housing affordability will actually decrease by 5%-10% especially with mortgage rates also predicted to rise with the end of QE3 and weakened Chinese and European economies.
Another interesting potential is that for millennials to begin outnumbering Gen X’ers in the homebuyers market. Data shows that a larger proportion of millennials want to buy a home in within the next 5 years than Gen X’ers, but are holding off because of a greater inclination to delay getting married and having children. Data would suggest that rent prices will increase more quickly than home values, pushing more millennial renters towards the home buying market.
Generally speaking, we will have to see how the transition from quantitative easing will affect the housing market. We should see prices stabilize, but geopolitical factors such as historically low oil prices and generally weakened superpower economies are wild cards that can have a strong effect on the market.