Boston Area Real Estate News – January 2015

Boston Area Real Estate News - January 2015

In our Boston Area Real Estate News for January 2015:

Boston Area Housing – What to Expect in 2015

As we turn the calendar to 2015, it seems only fitting that we explore Boston Area housing and some of the things to watch for in the new year.

2015 Boston area housing forecast and what to expect in the new year.

Boston Area Housing – Prices, Inventory and Sales

Let's start our look at Boston Area housing with Prices, and what's expected to happen in 2015.

When all the figures are in, it appears Boston Area housing prices – as measured by the national repeat sales index (Case-Shiller, CoreLogic) – will be up about 5% or so in 2014 (after increasing about 12% in 2013).

Some of the key factors in 2012 and 2013 were limited inventory, fewer foreclosures, investor buying in certain areas, and a change in psychology as buyers and sellers started believing house prices had bottomed.  In some areas, there appeared to be a bounce off the bottom – but that bounce appears to have ended in 2014.  The investor buying has slowed – as have distressed sales.

The consensus of housing analysts appears to be for price increases of around 3.5% to 4.0% in 2015.

Inventory – It appears housing inventory bottomed in early 2013. The question is, will inventory increase further in 2015, and, if so, by how much?

Inventory is not seasonally adjusted, and usually inventory decreases from the seasonal high in mid-summer to the seasonal lows in December and January as sellers take their homes off the market for the holidays.

The Boston Area housing market is slowly moving back to normal, and real estate is very local, as we all know. But our best guess at this point is, available inventory will increase further in 2015. If this holds true, it will keep home price increases from going to high too fast, which is never a good thing for the Boston Area housing market.

Also of Interest  Mortgage Rate Hikes Starting to Affect Boston Area Housing

Sales – CoreLogic released its 2015 Housing Outlook that shows home sales will increase by 9 percent. The most important economic trend is that employment growth for millennials began to improve in 2014, with the 25- to 29-year-old segment experiencing a 3 percent improvement in employment growth — one percentage point higher than the overall employment growth rate. That's important because this age group is the key first-time homebuyer segment.

When it comes to the Boston Area housing market, 2015 may be the year first-time home buyers make a comeback. With rents rising faster than incomes, many Millennials are expected to start looking to buy homes of their own.

Here are two more Boston Area housing market trends economists and other industry experts expect to see in the year ahead, in additon to the price expectations and inventory projects we just covered.

Looser Lending Standards – In early December, Fannie Mae and Freddie Mac put new lending guidelines in place and started offering 3% down payment mortgages that will make it easier for more first-time buyers to qualify for a mortgage.
Add to that a strengthening job market, and prospects look much brighter for young home buyers.

First time home buyers are important to the overall Boston Area housing market because a spike in the number of first time home buyers should spark a chain reaction by enabling existing homeowners to sell their homes and buy more expensive ones.

Mortgage Rates – If there's any single market trend that real estate industry pros have gotten consistently wrong lately, it's the direction of mortgage rates. But most do expect rates to rise at some point in 2015.

In December, the Federal Reserve signaled that it would not raise the Federal Funds rate until the summer of 2015 or perhaps even later.

With the mortgage rate guessing game continuing as we start the new year, many experts believe rates will peak in 2015 at 4.75% for a 30-year fixed rate mortgage, and even if they hit 5.00%, that's still a very favorable rate, historically.

Also of Interest  Boston Area Housing - 4 Key Trends

An increase to 4.5% from the current 4% adds about $60 a month to mortgage payments on a loan with a principal balance of $200,000. Not enough to keep buyers away, when rental rates are increasing much faster, comparitively speaking.

As the economy improves and salaries rise, Millennials are expected to become a bigger force in the Boston Area housing market in the new year. Households headed by Millennials are expected to see significant growth in 2015, particularly as the economy continues to make gains.

Millennials are expected to drive two-thirds of household formations over the next five years, according to a report from the National Association of Realtors. The forecasted addition of 2.5 million jobs next year, as well as an increase in household formation, are the two factors that® points to in driving more first time home buyers to the Boston Area housing market.

As always, we'll continue to track all of these Boston Area housing trends for you throughout the new year and keep you updated right here.