2015 Real Estate Market Predictions are in. Four of Riverside County’s top real estate and mortgage experts predict what to expect for our local housing market for 2015.
We all have questions, right? Will mortgages rates go up? Will home prices remain stable, go down, or appreciate? Will it be a sellers or a buyers market? How long will it take to sell (or buy) a home in 2015? Should I buy an investment property? Are their new homebuyer assistance programs available?
The best way to predict the future is to create it. – Peter Drucker
Mortgage Rates & Homebuyer Assistance Programs Will Affect the Riverside County Housing Market
Brad Yzermans, Mortgage Loan Originator & Homeownership Educator, NMLS #315238, Author/Blogger at HomeLoanArtist.com
I predict 2015 will see mortgage rates rise at least .5%. This will cause homeownership to become less affordable because when payments rise, this reduces how much a buyer qualifies for because of a higher DTI ratio.
I think every financial analyst expert agrees that mortgage rates will rise in 2015. Lawrence Yun, the Chief Economist for the National Association of Realtors even expects rates to go up to 5.5%!! (and he’s always right)
Can you imagine how you’ll feel if you wait until October/November to buy a $300,000 home and mortgag rates have risen .75% from where they are now in January of 2015? Your mortgage payment will have gone up by about $135/month!!
If you are waiting to buy, just withdraw $135 from your ATM each month now and burn it to see how it feels….then keep doing that until when you do plan to buy. Multiple that by 30 years and waiting could cost you over $48,000 for the life of the loan.
I also predict 2015 will be the year where new down payment assistance programs and the return of the Conventional 3% down home loan program will play a major role in helping FTHB’s account for 40% of the home sales.
Most of these first time hombuyers will come from the Millennial group finally leaving home (many relocating from Orange County, LA, and San Diego County) and Boomerang buyers who’ve satisfied their short sale or foreclosure waiting period and ready to re-enter the market as first time homebuyers.
Sadly, a recent study found that 70% of people buying homes reported never having been told by their mortgage broker or Realtor that special down payment assistance programs even exist.
Very few people in Riverside County are aware of the multiple homebuyer programs they may be eligible from local, county, state sponsored down payment assistance program and/or a $0 down payment mortgage programs.
If a buyer is not eligible for a homebuyer assistance prorgam, here are 15 other ways to find down payment money.
2015: A Great Year for Real Estate in Temecula
Alisa Morrison, Temecula Real Estate Professional, CA BRE Lic# 01860119, HomeSmart, (951) 491-5838 www.AlisaMorrison.com
Distressed sales have dropped to less than 10% of the market, sales prices calmed down and saw a modest 7% gain in 2014, interest rates remain at historic lows, employment is up, down payment assistance and new loan programs have given first time home buyers an alternative to FHA loans which suffered when the maximum loan amount was decreased for Riverside county.
Many buyers who had a previous short sale or foreclosure (commonly referred to as “Boomerang Buyers”), have passed their waiting periods to repurchase and are ready to enter the market once again.
Inventory levels peaked at a four-year high in July as sellers tried to take advantage of higher sales prices and sellers who were previously unable to sell due to negative equity were finally able to sell.
Uncertainty in the overall economy kept many home buyers on the fence and left us with an abundance of inventory and an average of 70 days on market to sell. Since July, inventory levels have plummeted by nearly half to their lowest level in 18 months as homes finally sold or were taken off the market.
As buyers return to the market following the seasonal doldrums, this shortage of inventory is good news for sellers who should see the return of multiple offer situations and the ability to drive sales prices higher at a steady pace before the anticipated increase in interest rates later in the year.
2015: Slight Buyers Market and Rates Going Up
Jory Blake, Corona/Riverside Real Estate Professional, CA BRE Lic #01859783, Keller Williams, (951) 742-3751 www.JoryBlake.com
In regards to actual home value and pricing , you can expect to see an equalizing of “supply vs. demand” giving buyers a slight advantage in negotiating better prices. This in turn will cause sellers to be more competitive when seeking buyers. Sellers will also be giving up more concessions in order to close the deal.
Homeowners who have been waiting for a market recovery, already realized a 25-35% gain in value in 2013, went through the price-correction adjustment in 2014 , and now are seeing the leveling off of prices, this creates the “right-size” client.
With the imminent increase in interest rates, it will be interesting to see the way consumers react, although I don’ forsee any noticeable affect on the market.
Some buyers may be slowly “priced out of the market”, meaning they can no longer afford the higher payment and other first time buyers will realize the importance of being able to borrower money at such a low rate and lock in a home loan before rates really shoot up.
On another note, people who foreclosed, short-sold and filed bankruptcy during the 2007-2012 period are now back to work and able to purchase.
2015 Market: Just Like Cooking Ribs, Low and Slow
Brett Chappell, Temecula-Murrieta-Menifee Realtor, CA BRE Lic# 01360291, Chappell Team Real Estate Services, (951) 316-1315 www.ChappellREteam.com
Just like cooking ribs, slow and low will describe the 2015 housing market in Southern California. We should expect to see a low level of appreciation and a slightly slower market than we have seen in years past as we continue to recover from “The Great Recession”.
While Riverside County did see a 4.7% increase in the median price in 2014, the sales volume fell short of predictions, meaning we didn’t sell as many homes as predicted.
Two major factors impacted the market in 2014 which will spill over to the 2015:
Investors have “left the building”. The past few years our local real estate economy has experienced something totally unprecedented: institutional investment into single-family dwellings. Historically, it has not been a typical strategy for institutional investors and private hedge fund managers to dump billions into single-family homes, but capitalization rates were primed for the taking and many families just trying to buy a house were outbid by all-cash billion dollar hedge funds. With the sharp increase in values from 2012-2014, those investors are no longer in the local market.
Household formation has dropped considerably. New household formations dropped below 500,000 in the 2013-2014 year. In each of the previous two years, household formation averaged 1.3 billion. This is when a young adult leaves the nest and makes a home for themselves.
This impacted the first time buyer market considerably, which fuels the “move-up” market, and so on. First-time home buyers typically represent around 40% of the market, however in November 2014 the National Association of Realtors reported they represented only 33% of the overall market. These findings reported the lowest share since 1987.
Fortunately, we have finally found some calm water in the market. I expect to see a balanced market in 2015 with 3% appreciation and very similar sales volume as 2014.
There are more homes on the market today, which give buyers plenty to choose from. Values have increased dramatically from 2007-2008 lows, which means many sellers are making money too.