The new year is finally here and there are a few different trends that may impact the housing market. Job improvement, preferences of the new generation of homebuyers, changing mortgage rates, home values, housing starts and population growth may ultimately dictate the expansion of the market in 2015 according to Fortune.
The new generation of homebuyers
Millennials are predicted to dictate the growth or decline of the housing market.The U.S. Census Bureau accounted for 73 million young adults aged 18 to 34 in the nation. This is the largest generation in three decades and Fortune believes many of these individuals making up the demographic will be ready to upgrade to new homes this year due to marriage and family planning.
According to Realtor.com's chief economist, Jonathan Smoke, 2015 will be the year that the presence of millennials will notably impact the housing market. Smoke predicts that in the next five years millennials will make up two-thirds of all new households.
An improving economy and job market also may provide benefits for this generation more than any other demographic in the U.S. According to Smoke, job growth for millennials proves to be 60 percent better than the rest of the country. An expanding job market may be the necessary ingredients to nudge this generation in the direction of homebuying.
Mortgage rates predicted to increase
This prediction certainly sounds familiar. Economists once again predict mortgage rates to increase in the upcoming year. While they may not have been quite so spot-on with their predictions for 2014, many insist on the inevitability of higher rates. Fortune's poll of economists indicated an anticipated average 5 percent interest rate for a 30-year fixed rate mortgage and Freddie Mac forecast a more conservative rate of 4.6 percent by the end of 2015.
Increased number of home starts and sales anticipated
Freddie Mac expects to see a jump in both home starts and sales in the upcoming year. A 20 percent leap in housing starts and a 5 percent increase in home sales are anticipated by the company. Single-family and rental apartment space will be the primary real estate options started and sold in 2015.
Fannie Mae projected a year-over-year increase of 22.2 percent in single-family home starts this year and the company anticipated single-family home sales to increase 18.7 percent year over year. These jumps are predicted due to a potential rising demand for housing brought about by aging millennials.
Lower oil prices may impact housing market
Oil prices have dipped impressively low toward the end of 2014. In fact, USA Today Money reported Dec. 31 as the lowest annual price drop since 2008. U.S. crude oil fell 46 percent Dec. 21 and Brent decreased 48 percent for the year.
DS News reported the dropping price of crude oil may lead to potential homebuyers feeling more comfortable purchasing a home due to lower energy costs. In addition, paying less at the pump provides a little extra cushion in everyone's budgets.
That overall savings could encourage first-time buyers to move into the market and existing homeowners to potentially upgrade. Consumers with a little extra spending money from all that savings are more likely to invest in housing. This possible increased demand could bolster the housing market in 2015.
Home values forecast to increase
In Fortune's poll, nearly all economists agreed that home values will continue to rise but believed this would occur at a far slower pace. The rebound after the housing market crisis in 2008 propelled the rapid acceleration seen prior to 2015 and economists predict that the rebound may be losing steam.
The anticipated increase in home values, along with predicted rising mortgage rates, may ultimately contribute to lower affordability in 2015.