No one appears to expect a huge jump in mortgage interest rates in 2015. The general consensus is that by the end of the year they could be up to 5 percent, around 1 percent higher than they are now.

An increase from 4 to 5 percent would mean paying approximately $60 more per month in principal and interest for every $100,000 borrowed.  

Move over Gen X'ers, 2015 is the year that Millennials (people under 35) are expected to take over as the largest home buyer segment. Many in this age group had to put marriage, parenting, and household formation on hold during the recession, but now their employment picture is especially strong, and owning a home is high on their list of priorities.

An increase in younger home buyers starting their own households is expected to create more demand for entry-level priced homes in 2015.  Sam Khater of CoreLogic notes that in the fall of 2014 lower-priced homes were appreciating at 1.5 times the rate of higher-priced homes in all top 25 markets.  Builders are expected to respond by focusing on more affordable housing communities, after several years of targeting the higher price tiers. 

Zillow's chief economist Stan Humphries predicts a 3.5 percent increase in rents nationwide next year.  Many Millennials moving forward are still saddled with enormous student debt, and need to pay it down or at least save up for a down payment before they can purchase a home.

Rising home values are allowing formerly underwater homeowners to finally list their homes, and 36 percent of respondents to a recent survey by Trulia said that 2015 would be a better year to sell than 2014.  (16 percent thought the opposite.)  Most housing experts expect a boost in housing inventory this year, which should help alleviate the shortages seen in parts of the U.S.

Last fall Fannie Mae and Freddie Mac, the government-sponsored lending entities that buy around two-thirds of all home loans, removed penalties imposed upon lenders for various situations.  This means that it is now safer overall for banks to lend money.  They also lowered the down payment requirement for conventional loans from 5 percent to 3 percent for first-time buyers.

The total number of homes sold in 2015 is expected to rise compared to 2014, with CoreLogic's Sam Khater predicting a 9 percent increase.  The Mortgage Bankers Association expects a 15 percent increase in new mortgages for purchases.  

These are exciting trends in the housing market, and fortunately far more positive than the ones we were looking at five years ago.  One thing to keep in mind is that while there are sound reasons supporting the predictions summarized here, experts can be wrong and a year ago headlines were not forecasting interest rates being back down to 4 percent or oil at under $50 per barrel. :)  It will be interesting to see how market factors play out in 2015. 

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Dennis and Jane Guertin
Broker/Owner, REALTOR®, CRS, SFR, ABR, CBR, e-PRO, GRI
Guertin Family Realty

Jane@GuertinFamilyRealty.com
952-442-1300
www.GuertinFamilyRealty.com