Since the housing market crash in 2008, the market has been steadily recovering. While this trend is set to continue, 2015’s housing market will be a bit different than the earlier years. These changes were highlighted in a Forbes article by Erin Carlyle. In the article she gave 11 predictions for the market. Even though these were all valuable predictions, only five of them really stood out to me. These five are listed below.
1) Fore-closures will Match Pre-recession Levels
Flickr Creative Commons: Nicholas A. Tonelli
It is always a positive thing that less home are going into foreclosure. It means more people have job, more money, and better opportunities. Fortunately, for us, this trend will continue. In fact, in “2014, there were 1,256,070 foreclosure filings in the U.S., according to Irvine, Calif.-based data firm RealtyTrac, down about 17.2% from the same period the prior year, when there were 1,516,332 filings“(Carlyle 2). This statistic shows that the market is recovering, and will continue to “return to pre-crisis levels”(Carlyle 2).
2) Prices will Rise More Slowly
Even though increasing housing prices is a good thing for home owners, this year the rate at which prices increase is going to slow, proving that the market is stabilizing. The reason for this is that “housing inventory levels and the exit of investors from the market are helping to put the brakes on home price escalation”(Carlyle 1). Even though investors are leaving the market, it is not as bad as it sounds. In fact it “represents a fundamental shift in the market: we’ve moved out of the rapid recovery phase and into a new normal”(Carlyle 1).
3) Affordability will Worsen
The decrease of affordability is the result of two specific things. The first is that housing prices have increased, making the affordability of the homes decrease. The second is due to “higher mortgage rates which erode affordability”(Carlyle 1). These factors will prevent another housing bubble and overvalued homes, both positive things, as we do not want to have another housing market crash.
4) Mortgage Rates will Rise
Also in response to the increasing value of homes and booming market, Feds have increased mortgage rates, to slow the pace of growth. The increase in mortgage rates is small, “The Mortgage Bankers’ Association predicts that rates will rise to 5% by the end of 2015”(Carlyle 1). The five percent mortgage rate will still keep buyers interested and the housing market improving.
5) Rent Increases will Outpace Home Value Growth
Currently the millennial generation is renting, rather than purchasing homes. While this is not a bad thing, it has lead to increased percentage of rental valuation, which will be larger than the percentage of home valuation. In fact, “forecasts that rents will rise 3.5% in 2015, outpacing his predicted 2.5% for annual home price gains”(Carlyle 1).
