5 Housing Market Predictions For 2015 Mortgage Rates Going To 6 Pct Maybe
5 Housing Market Predictions For 2015 Mortgage Rates Going To 6 Pct Maybe
Good morning (or evening if
you are getting this later Good evening).
I just read this great
article in Realtor.Com that is predicting interest Rates will rise to 6% by the end of 2015. There have been so many
articles in the past month from the NY Times, Wall Street Journal and Financial
Times, just to name a few, that is predicting 5% to 6% mortgage rates by the
end of next year. We re at a very low 3.875%
so these increases are huge and will have a dramatic effect on the real
estate market along with your monthly payments.
I have also been writing
for a long time to stop looking at housing prices going up or down $10,000 or
$20,000 that is not the ball to keep your eyes on, it is the mortgage rates.
To give you an example; You are buying a $500,000 (
For those of you outside Los Angeles, no I have not lost my mind at least not
for LA) You put 20% down, yes I am still talking LA , and you have a $400,000
mortgage. With a 3.875% 30 year fixed mortgage your monthly payment would be
$1880.95 while at 6.00% it would be $2400.00. Now if you increase your mortgage
to $425,000 at 3.875% your monthly payment is $1998.51. So you can see that
mortgage rates effect you much more then the cost of the house.
year is about to dawn—and the outlook on the housing market is definitely
brighter. After all, 2014 was the best year in the U.S. economic recovery since
the recession of 2008-2009.
accelerating economic recovery fueling job and income growth, prospects are
good for homeowners and would-be home buyers.
Rates Will Head Back Up
The flip side of the improving
economy is that (sigh) mortgage rates will inevitably head up again. We’ve
had a great run, but the honeymoon is over, and it’s time to settle in for a
relationship that balances job growth with higher-but-still-reasonable interest
Federal Reserve has indicated it will increase the federal funds rate—which has
an indirect but significant effect on mortgage rates—next year. The rate has
remained near zero since December 2008.
Although the Fed might wait as late
as early 2016, realtor.com®
Chief Economist Jonathan Smoke suggested the
increase will come in mid-2015, and mortgage rates will increase ahead of the
forecast for housing assumes the 30-year fixed rate will reach 5% by the end of
2015,” Smoke said. “The one-year adjustable rate will likely rise less if much
at all, and accordingly, we are likely to see a shift into more adjustable and
hybrid mortgages over fixed.”
Millennials Will Set Up House
The millennial generation is beginning its ascent—and no, not
all of these youngsters born between 1981 and 2000 are living with their
parents as they struggle to pay off student loan debt. Sure, they’ve faced huge
challenges in the job market, but employment is improving, and older millennials
are planning ahead.
65% of first-time home buyers are part of this older millennial group (ages
25-34), Smoke noted, pointing out that these young adults are at an age when
many marry and start families.
make up around 65% of first-time home buyers,” Smoke said. “Of the millennials
who are buying a home, 86% indicate that their motivation is a change in family
with tough credit qualification standards and limited credit history,
he added, millennials are expected to buy more in affordable areas in the
Midwest and the South.
than two-thirds of household growth in the next five years is expected to come
from millennials, according to Smoke. This generation is bigger than the baby
boomer generation, so even though its youngest members will be only 15 in 2015,
the market is only beginning to feel its impact.
Will Break New Ground
Although total housing starts
(construction on new housing
units) barely broke 1 million in 2014 and was driven by multifamily
homes, Smoke noted the pace will pick up in 2015 and shift in focus.
forecasting 16% growth in starts, driven now more by growth in single-family
starts, which we are expecting to grow 21%,” he said.
shortages of labor and building product material will limit further growth in
single-family construction and will keep overall supply tight.
constraints on new construction supply factor into our assumptions about
existing home sales growth and overall tight supply of homes for sale,” Smoke
Will Continue to Be a Major Factor
mortgage qualification standards are keeping many consumers, especially younger
ones, from buying a home with a bank loan. This situation has remained about
the same for the last four years, although it’s possible that various new
federal housing policy initiatives might help loosen those standards in 2015.
it will increasingly become clear that lack of access to credit is holding back
the housing market.
just look at the distribution of credit scores, at least 10% of current
homeowners with mortgages would not qualify for a new mortgage today,” Smoke
Opening up access to credit would be a game changer in the housing
market, Smoke noted, allowing 500,000 to 750,000 would-be buyers who are now
cooling their heels to achieve the dream of homeownership.
Close Out the Foreclosure Crisis
It’s been seven years since the
housing bubble burst and foreclosures skyrocketed, but in 2015 we’ll see the
end of that era. Already this year has seen a major improvement in the
composition of sales—that is, there are fewer foreclosures and short sales in the mix.
on pace for foreclosure inventories to end 2014 down more than 30%, and next
year should see a slightly greater decrease as foreclosures fall to normal
levels,” Smoke said.
while these trends will be apparent nationwide, housing is still a local issue.
situation differs in every market, even every neighborhood,” Smoke added. “Each
has its own unique, long-term trends in home values, which reflects local
demand and supply conditions.”
And the situation is different for
each individual home. Setting and negotiating a home price requires complex
analysis, which is why
most people prefer to work with an experienced REALTOR®.
le in Realtor.Com
I am Bob Schmalz a California Licensed Real Estate Broker, I am the founder and owner of West Los Angeles Real Estate Group, handling all Real Estate needs from residential to investments To name a few of the cities we cover in West Los Angeles; Beverly Hills, Santa Monica, Brentwood , Pacific Palisades and Malibu are some of the most popular. Our beliefs are that our clients should have the knowledge they need to make decisions in there Real Estate Goals. In this way our clients helps us make the right decisions for themselves.
FIRST TIME HOMEBUYERS:INTEREST RATES BELOW 4% + LOW DOWN PA
"Dear Bob and Barbara,
I should have sat down and wrote this sooner. I hope your holidays were beautiful and the New Year has started nicely for you.
I wish to thank both of you for helping Carl and I find a beautiful home for our family. We needed to work on a budget yet we wanted something nice. We found it with your patience and support throughout the process.
I loved the way you took time to show us each category and price range. You showed us houses, townhomes, and condos. We were able to see what we could get for our money and what city or area we could get for the price we offered. You have a wonderful "eye" to see the flaws and good points of a place, and we really appreciate that knowledge.
Thank you too for our homecoming gifts, that was a personal touch.
May God bless you and your family always.
Christina & Carl Holkirk