The 2015 Housing Outlook
Economic fundamentals are finally back in the driver's seat, writes Sam Khafer for Core Logic. There are a few key reasons you could see your contractor rental business pick up in 2015 as the housing market improves.
- The U.S. economy is picking up steam, as strong employment growth is exhibited within the first-time homebuyer age group.
- Home sales will increase by 9 percent in 2015, housing starts are expected to grow 14 percent and home price growth is expected to moderate.
- Markets with the highest home price appreciation reflect fundamental strengths of their economies, particularly technology and energy. However, the drop in oil prices may alter the equation.
- The lower-end home price category is growing faster than the higher-end price category in the top 25 U.S. markets, reflecting tight supply and lack of new construction.
Khafer says demand drivers, such as consumption and capital investments, experienced steady improvement last year, and employment grew at an average of 2.0 percent on a year-over-year basis for the three months ending in November 2014, the strongest rate since the three months ending in March 2006. Perhaps most important - employment growth for millenials began to improve. Important because this age group is the key first-time homebuyer.
Looking ahead to 2015, stronger economic fundamentals mean demand for housing is expected to increase, with overall sales projected to increase to 5.8 million in 2015, up 9 percent from 5.3 million in 2014. Total housing starts are expected to reach 1.1 million in 2015, a 14 percent year-over-year increase. This upsurge is healthy, but it’s still 23 percent below the 1.45 million average seen over the last 50+ years. The 30-year fixed mortgage rate is only expected to rise to 4.3 percent, up from 4.2 percent in 2014. Mortgage rates should not increase much, as inflation is low, with minimal upside risk given the deceleration in home price growth and drop in oil prices, the two largest segments of consumer inflation.
Many factors point to improved consumer confidence, he notes, which means more people become willing to spend money on high-ticket items. Click here for the full article.
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