the housing market and new construction may be on the upswing in 2015

Rental markets will stay strong

While first time home ownership will rise in 2015, thanks to households headed by 30-somethings bankrolled by greater job security and rising confidence in the housing market, younger Millennials leaving college dorms and their parent’s homes will keep the rental market robust. Americans in their 20s strongly prefer to rent in urban centers close to jobs and nightlife, locations where rental properties hold their value and are highly sought after. Rental housing inventory should remain about the same, due to the 2014 boom in multi-family construction.

Don't pull out your vacancy sign just yet, housing inventory should remain stable in 2015.

Don’t pull out your vacancy sign just yet, housing inventory should remain stable in 2015.

Foreclosures will slow

2014 foreclosure rates were lower than those in 2013 during every month, for a total of 1,256,070 foreclosure filings this year. That’s a 17% downward change from the 2013 total of 1,516,332 filings, according to RealtyTrac.com. Foreclosures rates will continue to decline, and possibly reach pre-recession levels in 2015. The decline of foreclosed properties as a percentage of inventory will help lift and stabilize home prices throughout next year, a sign that the market recovery is picking up momentum it can sustain.

Home prices will rise, but slower than they have been

Home prices vary widely depending on location so no predicted trend will apply to every local housing market. Gains in home values slowed in 2014 when compared to the earlier years of the recovery, but were still positive with a year-over-year change of 4.8% reported in September of 2014 by Case-Shiller Data. Investors who dominated the market in 2012 through early 2014 are pulling out of the market and prices are stabilizing, leading toward a new, more sustainable normal for the housing market. Predictions for overall price gains for 2015 vary depending on the source, but fall in the 3-6% range for most markets. Cities in California and the Southwest may continue to see double digit increases in home values, mirroring their robust and growing job markets.

Multi-family construction that broke ground in 2014 will be on the market next year.

Multi-family construction that broke ground in 2014 will be on the market next year.

Affordability will decline

Household income is growing so slowly that the project bump in interest rates combined with a more modest home price gain, will erode affordability for many. Hot urban markets like San Francisco and New York are already out of reach for the majority of the middle class, and that trend may extend to up and coming markets in other parts of California and the Southwest. Markets in Texas, such as Austin, Dallas, and Houston are facing similar issues of high development and rent rates with home prices out of reach for the average household. Home ownership will be more affordable in housing markets with slower rates of recovery and development, like the Midwest and the deep South.

A strong set up for a fuller recovery in 2016

First-time ownership, new single-family construction, and the sale of new homes won’t reach pre-recession levels in 2015. But we will see a stabilizing market that will lift the confidence of households burned by the recession. If 2015 brings a better job market with higher income gains, and the continued development of young Millennial professionals, then 2016 could be the year that officially signals the end of the recovery and back to business as usual.

Join the conversation! 2 Comments

  1. I believe this information rings true as long as you go along with the mainstream media and the B.S. recovery!
    I feel strongly 2016 will NOT be the year that “signals the end of recovery and back to business as usual” (LOL) …More likely 2016 will be the year our economy tanks…housing affordability goes out the door…household incomes and savings reach an all time low..and new home sales tank yet again…as reality sets in..credit cards become maxed out..and folks are forced to actually live within their means! The rental market is going to blow up!! while the new home sales market shrinks!

    The current real estate market hype( overly inflated rising home prices again) coupled along with low interest rates…have accomplished ONE thing…Making Home Ownership completely out of reach for the millennial’s who have next to nothing in their savings to pay for a down payment on a half a million dollar 3 bedroom house. We just priced them out of home-ownership and forced them to rent for a longtime to come! Thanks Real Estate Agents and Government!! Job well done! Rental market will continue to grow for many more years to come!! :)

  2. Hey Mandy, great points. I’d have to agree with you for the most part. Unfortunately, I think it’s less about what we’ve done and more about the progression of society. It’s just the new norm I’m afraid.

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