Realtor.com’s Chief Economist Announces First Annual Forecast
Since the recession of 2008-2009, America’s economy experienced its best year in 2014, as the country’s
economic recovery continues to improve. Anticipating the growth ahead, Realtor.com’s chief economist
Jonathan Smoke has released his first forecast for the housing market in 2015. Below are his predictions
for next year.
Making sense of the story
Smoke believes that millennials will break out in 2015 as homeowners and drive household
formation. Households headed by millennials will see significant growth as a reflection of
economic gains. Millennials will also drive two-thirds of household formations over the next five
Overall, both population and households have grown at a slightly higher pace in 2014, and this
trend will continue in 2015 with modest improvement over 2014 increases.
Smoke commented, “The story about millennials not forming households and getting into home
buying is more of a 2012 and early 2013 story. It’s outdated. Our view of 2015 is informed by
strong trends and indicators of what’s happening today with millennials.”
Existing home sales will grow as more buyers enter the market, motivated by a clear
understanding that both rates and prices will continue to rise.
Low inventory levels and demand driven by improved employment opportunities will push home
prices up next year. While first-time home buyers have many economic factors working in their
favor, increasing home prices will make it more difficult to enter the market.
Mortgage rates will increase in the middle of 2015, as the Federal Reserve increases its target rate
by at least 50 basis points before the end of the year. Thirty-year, fixed rate mortgages will reach
5 percent by the end of 2015.
Affordability will decline in 2015 by 5-10 percent, based on home price appreciation and
increasing mortgage interest rates. This decline will be somewhat offset by increasing incomes.
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Nine Reasons to Buy a House Right Now
If you’re in the market to buy a home, then now might be the perfect time to seal the deal on your purchase, as there are several conditions working in the favor of home buyers. Firstly, gains in home prices have slowed down and mortgage rates historically remain low. Furthermore, loan requirements are softening, and with fewer buyers around the holidays, there could be less competition and more bargaining power for buyers.
Read the full story below:
Why It’s So Hard for Millennials to Find a Place to Live and Work
Source: The Atlantic
Young people looking to launch their careers often are forced to choose between a place with affordable housing but little upward mobility versus a region with strong upward mobility and scarce affordable housing. The Atlantic notes that “When good jobs for the middle class and affordable homes are living in different cities, it represents a slow-motion splintering of the American Dream.” It presents a problem for the livelihood of Americans that affordable homes cluster in the cities with lower wages and less upwardly mobile families.
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Silicon Valley Real Estate Median Price Continues to Rise
In all reported counties – Monterey, San Benito, San Mateo, Santa Clara and Santa Cruz – we are seeing the story play out in the prices.
Year-over-year sales of single family homes show some of the highest median prices of the year. San Mateo leads the climb with a 16% increase over last year, followed closely by Santa Clara up 13%, Monterey up 12%, Santa Cruz up 11% and San Benito up 5%.
Total dollars sold for single family homes are also up. With the sale of a $31M+ home in Monterey, the county saw an increase in total dollars of more than 75% over October 2013. Santa Cruz has the next highest jump at a 16%, followed by Santa Clara up 9%, San Benito up 7% and San Mateo up only 2%.
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