5 Housing Predictions for 2015

As we get ready turn the calendar to a new year, it’s a good time not only look back at how the housing market did in 2014, but to use that information to try and predict what is in store for 2015. And while real estate can never offer assurances, here are 5 trends that we might safely expect to see in the coming year.

1. Rising home values

The idea of a “housing market” is actually a localized concept. The market trends may be increasing in some areas of the country, while decreasing in others. Even with that being said, you can look at overall national averages to get a general idea of where trends might be heading. And if you look to these national averages, home values have been steadily rising for quite some time. The S&P/Case-Shiller Home Price Index published a report in October that revealed that prices have risen nationwide by 5.6% over the last year. And by all indications, this trend will continue into 2015.

2. Double-digit gains

Zillow, one of the nation’s top real estate information companies, uses a forecasting tool that can be adjusted based on projected increase (or decrease) in home values. And according to their data, California (and the Southwest in general) is the only area that will see double-digit increases. In much of California, Zillow predicts 10-15% gains through 2015. These predictions are based on Zillow’s own pricing models, actual sale prices, and other housing trends. So although it is just a prediction, it is based on solid statistical data.

3. Mortgage rates around 5%

Again, in looking at predictions based on strong housing data, Freddie Mac projects mortgage rates to hang somewhere around 5% in 2015. Freddie Mac performs weekly mortgage rate surveys, and based on this information, they predict rates to gradually rise over the next 12 months. While probably hovering just below 5% for most of the year, the projected average rate assigned to a 30-year loan could go just over 5% by the end of 2015.

4. Foreclosure decline

When the housing market crashed several years ago, you couldn’t go anywhere without seeing a slew of foreclosures. Over the last couple of years, however, the number of foreclosures has steadily declined which reflects a normalization of not only the housing market, but of the economy as a whole. In fact, financial data firm, Core Logic recently reported that foreclosure inventory has declined for 31 straight months. And there is no reason not to believe that this trend won’t continue. When there is a large number of foreclosures on the market they most often sell for far less than market value. This in turn, drops home prices across the board. So it is fairly safe to say that there will be fewer foreclosures in 2015 and this will serve to raise and stabilize real estate values.

5. Loosening of mortgage standards

Another prediction based on current and forecasted trends, is that mortgages will be easier to obtain in 2015. The Federal Reserve recently released a report from their “Senior Loan Officer Survey on Bank Lending Practices” that stated mortgage lenders are easing off of their standards in a number of ways. The main two areas you may see a more relaxed criteria is in credit scores and debt ratios. The main reason for this is that they anticipate a lower number of mortgage applications in 2015 (based on the decline shown in 2014), and when the amount of mortgages goes down, lenders try to loosen the reigns in order to maintain a sustainable number of loans.

Keep in mind that all of these predictions are just that: predictions. They are by no means guarantees, but by using the analysis of experts in the field and accurate data, we can use these “educated guesses” to our benefit. After all, educating yourself as best you can is the first step to a successful home purchase.

If you are in the market for an experienced mortgage lender, please don’t hesitate to contact me at (858) 354-4777 or norma.nelson-wiberg@everbank.com.