2015 - What will it bring? - By Rick Yost

It is the time of the year when newspapers, magazines, and television are full of 2014 recaps and 2015 predictions. So in the spirit of the season, here are my predictions for real estate in 2015.
 

The economy will continue to improve. GDP was up in 2014 and will continue to trend higher in 2015. This will result in more job creation and higher consumer confidence. These two are ingredients for stronger housing demand.

Mortgage rates will remain low. The Federal Reserve ended their quantitative easing in 2014 and mortgage rates stayed low and even dipped below four percent for 30-year fixed rate mortgages. Freddie Mac predicts that mortgage rates will average 4.6 percent in 2015. While this is not as low as 2014, it is still historically very low. Interest rates should be at around five percent for 30-year fixed rate by the end of 2015.

Mortgage originations for single family homes will be down and multi-family originations will be up. 2014s low interest rates combined with slowly rising rates in 2015 will lead to a decline in refinance activity which has been more than half of single family homes originations over the last few years. Multi-family originations will be pushed higher by demand fueled by record rental rates. It is a good time to be a landlord.

While new housing starts have been healthy in Windham, they have been tepid in other parts of the state and the country. Expect that to change in 2015. Builder confidence and consumer confidence will combine to drive housing starts hire. This will create rising demand and pricing for raw, build-able land.

Foreclosures and distressed sales will continue to decline. 2014 saw foreclosures fall almost 30 percent and distressed sales fall as well. This trend will continue in 2015. The strengthening economy and home price appreciation will help more homeowners avoid foreclosure and short sales.

Home prices will continue to rise, but at a much slower rate. 2013 and 2014 saw abnormally high home price appreciation. 2013 home prices ended up 9.3 percent and 2014 will end with price appreciation of around 4.4 percent. This trend will continue in 2015, but at a more normalized rate. Expect a 3 to 3.5 percent rise in home prices this year. 

New home prices continue to be high in 2015. New home sales usually make up over 15 percent of home sales, but have only been 9 percent in recent years. New home prices still rose substantially this year. This suggests the new homes are overpriced and push down demand. New home prices will still be high, but the economy will help demand.

Inventories will loosen in 2015. Higher prices and lower foreclosure rates will decrease large investor participation and increased home values will allow more homeowners to sell. These will combine to create more inventory available for the average home buyer.

So what does this all really mean? If you have not refinanced your home in the last few years, do it now. Multifamily homes are a great investment in 2015. If you are thinking about trading your home up or down in the next few years, do it in 2015 while interest rates are still historically low and home price appreciation is normalizing. Great deals on foreclosures and distressed sales will be harder to find, so act now. New construction homes will offer substantially less value than a similar existing home in 2015. These some of the opportunities and pitfalls that 2015 holds.

 Here is hoping for a happy, healthy, and profitable 2015.