Real Estate Market Overview
Peter Haring, Broker
Millennials are those people born between 1992 and 2004. This millennial generation is expected to have a huge impact on both the local and national housing market in 2015. There are three reasons for this: a greatly improved economy driving household formations, low interest rates, and a stable housing market.
Last year, according to a survey by the National Association of Realtors, first time home buyers only accounted for 33% of all home sales. That is near a 30 year low. In a typical year, first time homebuyers generally account for around 40% of sales. This rate will likely go much higher during the next year or so. One survey of buyers, shows that number going as high as 46%. That's a big rebound. As the economy has improved, these buyers, many of whom have been living in parents basements are expected to form their own households and move into the market in a big way in 2015. Household formations are already the highest they've been since 2005.
Further, some economists are expecting interest rates to grow this year by as much as 1%, from around 4% up to nearly 5%. That would be nearly a 20% increase. The average increase is expected to be around 6/10 of a percent. Either way, that change is creating a lot of motivation for home buyers to purchase this spring rather than wait until laterin 2015. Many realize now is the time to take advantage of these low rates and lock in a fixed payment. Let's compare that to the alternative of renting. Ruth Mantel, economics reporter at Market Watch says, "Landlords have ramped up rents by the fastest pace in six years with national vacancy rates the lowest in two decades." As households are formed, millennials are increasingly seeing the wisdom of having a fixed mortgage payment rather than being subject to increasing rents.
This year will finally bring us closer to a stable rate of home price appreciation ranging from 3.7%-4% according to a recent Home Price AppreciationSurvey. For 2016, the same survey shows expected appreciation rates to be in a range from 3-3.5%. Those growth rates are reflective of historical norms in this country. These rates can give buyers confidence. According to the 2014 National Association of Realtors® Profile of Home Buyers and Sellers, 79 percent of recent buyers said their home is a good investment, and 40 percent believe it's better than stocks.
All together, it looks like we should have a very active real estate market in 2015.