Wednesday, 28 January 2015

Predictions on The US Mortgage Housing Market For The New Year 2015

Posted at  08:42  |  in  Mortgage

US Mortgage
Mortgage rates in the US have been at their historical lows since 2008 since the financial crisis but according to recent reports, they will rise in the New Year. But how much and when? For most of 2014, the average rate for a 30 year fixed rate mortgage has fluctuated between 4% and 4.5%. The Federal Home Loan Mortgage Corp., or Freddie Mac is predicting that mortgage rates will reach up to 5% in late 2015

At a recent panel discussion on the 2015 real estate market, the Chairman of Standard & Poor’s index Committee, David Blitzer was asked to describe the real estate and housing market in one word. His answer was “Mysterious”. His answer implies clearly that the real estate market can confound even the experts. But more importantly it suggests that housing has reached an inflection point. With the home prices in many markets at pre-bubble levels, we can’t expect the “rebound effect” to boost home values higher each month. There are some fundamentals like wage growth and population and also the tastes of the new generation that will dictate the trajectory of home prices in the New Year. 

Let’s have a look at some of the trends in the housing market in 2015.
  1. The wave of millennials will boost prices: The United States of America has been stuck in a demographic rut which has eventually dragged down the demand for homes. For the past decade, the biggest portion of the US population was made up of Baby Boomers, the folks who long ago settled down. But late last year, it was announced that the cohort of 23 year old Americans is now the largest in the country. The experts argue that this generation will drive two-thirds of household formations over the next five years.
  2. The young will continue to demand housing: At the S&P panel, Nobel Prize winning economist Robert Shiller pointed out the since the emergence of the housing crisis, the total value of owner-occupied housing was totally flat. The reason behind this is that builders have not been constructing many single family homes at all, a situation which the US economy never faced since the Great Depression. According to a new report, the Millennials will tend to live in markets like New York, Honolulu and Austin where homes are least affordable.
  3. Mortgage rates will definitely rise: While most analysts were convinced that mortgage rates would rise this year due to the improving economy and the winding down of the bond-buying stimulus program of Fed, the market didn’t comply with the expectations. The year started with the news that the US economy shrank down in the first quarter, which put the housing market on an edge over others. Such events kept having a downward pressure on the interest rates and mortgage rates. So, if you’re someone who is about to buy a house in 2015, you should take the above mentioned factors into consideration. Take a look at the bigger picture before making a decision.

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Jimmy Simond is founder of he share his immense knowledge of finance in this blog. You can follow him on Google+.


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