5 Things to Watch in Housing in 2015
The housing market has, by many measures, turned a corner. With the potential for interest rates to move higher, there is much to expect in 2015. Here are five trends to spot:
1. A last call for refinancing.
At its highly anticipated mid-December meeting, the Federal Reserve Board announced it would exercise "patience" when considering raising interest rates. Chair Janet Yellen indicated it would be early April before the board would meet again to discuss an increase in interest rates, meaning that the first quarter of 2015 could signify the end of historically low interest rates.
This means the window is starting to close for refinancing. This is the last call for anyone with a higher rate who has not yet refinanced. This is particularly critical for homeowners who took out an adjustable-rate mortgage.
Buyers who have been sitting on the sidelines should consider how rising interest rates could impact their monthly payments and purchasing power.
2. 3% down payments
If you're looking to buy your first home and have trouble coming up with a substantial down payment, there are new programs to assist you.
In early December, Fannie Mae and Freddie Mac announced conventional loan down payment programs that allow first-time buyers with good credit to qualify for a fixed-rate mortgage with a 3-percent down payment, rather than 5 percent.
There are stipulations to qualify for the program: Borrowers must meet first-time buyer requirements and they must reside in the home.
There are many states as well as national programs, which offer grants that range from 1 to 5 percent to be used for a down payment or closing costs.
And remember that smaller down payments mean you will pay mortgage insurance in addition to your mortgage payment each month.
These easing loan standards will allow more first-time buyers to enter the market.
3. Millennials may move from being renters to buyers
The millennial generation has been so far highly unlikely to buy homes. This is a group that has been hit with the triple whammy of student loan debt, entering the workforce in a weak jobs environment and tightened lending standards during the financial crisis.
However, 2015 is a year when millennials are likely to become buyers. Rising rents, available housing stock and life changes such as marriage and children will mean that it will make more sense for millennials to become first-time homeowners.
The job market is stronger now, and rents are only going higher. The monthly outlay for rent in many cities can often be more than a monthly mortgage payment, making owning more appealing than renting.
4. Foreclosed homeowners find relief
Those who lost their homes to foreclosure may find their way back into the market in 2015. Currently, these former homeowners can qualify for FHA mortgages. But even buyers interested in a more affordable conventional loan who had a foreclosure seven or more years ago will now see the default events starting to come off of their credit reports.
That could definitely begin to trigger an uptick in new home buying.
5. More 'For sale by owner' signs
Low interest rates and down-payment assistance programs could spur more buyers to enter the market, but sellers also have some advantages.
Sellers have become savvy the past few years by using online real-estate tools such as Zillow to price their and list their homes.
I'm seeing an increase in "For Sale by Owner" efforts recently, and this trend can expand beyond the fringes. People are trying to reduce their fees.