Another year, another changing picture when it comes to the housing market.
While how housing market changes will pan out can be difficult to predict at the beginning of the year, there are some signs that suggest a few trends will emerge, making 2015 a bit different from 2014 in terms of who’s buying and what’s available.
Whether you’re in the market for a new home this coming year, or are looking to refinance your current mortgage, there are a few changes to pay attention to.
What’s up with interest rates?
Interest rates were expected to climb during 2014, reaching 5 percent for a 30-year loan by the end of the year. But, that didn’t happen, and today, interest rates are still hovering below 4 percent for a 30-year mortgage. As the Los Angeles Times explains, a number of factors have kept interest rates pretty low, such as investments in U.S. bonds from foreign investors, even after the Federal Reserve ended its own bond buying program.
Although rates remain low now, it’s still anticipated that they will start to climb again by the end up the year. It could be that 2015 is the year when rates hit 5 percent again.
The emergence of millenials
Other housing market changes to note this year include the makeup of the average buyer. While a poor job market and the impact of the housing crisis might have kept Millenial buyers (born after 1981) out of the market and reduced the number of first time buyers, improving job options, combined with ever increasing rents, might make 2015 the year that Millenials start buying in force. To match the increased demand from first time buyers, US News and World Report notes that the construction of single family homes is expected to increase by 25 percent over 2015, with more than 800,000 single family homes expected to be built.
3 percent down
Mortgages are also changing this year. At the end of 2014, Fannie Mae and Freddie Mac announced that they started allowing first time buyers to obtain a mortgage with a down payment of just 3 percent. The high loan to value ratio mortgages are designed to make buying a home more accessible to more people. Although there is some concern that the low down payment loans will pave the way to the mistakes of the housing crisis, it’s worth pointing out the 3 percent down mortgages will be 30-year, fixed rate loans, not adjustable rate mortgages or interest-only loans. In exchange for a low down payment, the loans will require private mortgage insurance.
As the recession of 2008 moves further and further into the past, things are continuing to improve in the housing market. More first time buyers and changing mortgage rules can make the market more amenable to buyers in the months to come.
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