Does the housing market still bear scars of the Recession or is it on the path of recovery?
It has been a very odd year for the US housing market! The year started off with the Polar Vortex that was blamed for slowing down home sales during the initial part of the year. As we’re gradually nearing 2016, the National Association of Realtors expect sales of previously owned home to fall short of 2015, while according to the latest data, sales of new home show an improvement of just 2.8%. We all know that the housing market and the ups and downs have a direct impact in the mortgage market as well. Whenever there’s a positive improvement in the housing market, there has to be a noteworthy development in the mortgage market too as people usually tends to take out more mortgages when they get favorable conditions to purchase their dream home.
The recession might be over years ago but the scars are still remaining in the housing market. Take for instance the homeownership rate. In the year 2005, the homeownership rate in America was around 70% and today it stands at 64%, the lowest level that this nation has seen since 1994. However, the good news for sellers is that the demand for homes is again back and the prices of homes are continuing to rise. But for the homebuyers, especially the first time homebuyers, inflating price tags are not a positive change. Apart from rising prices, the issues of rapidly rising rent, sluggish growth in wages and huge amounts of student loans are coming in the way of American Dream.
Housing predictions for 2015 now that we’re halfway through the year
At the beginning of the year 2015, there have been so many predictions but now that we’re halfway through, here are some points that you need to know about how the rest of the year will unfold.
- Demand is still rising: In the largest 100 markets within the nation, it is still cheaper to own a home than rent a home, by a staggering 40% on a national basis. Real estate is definitely local and conditions usually vary, still there are many renters who see the portion of their paychecks that go to housing and they know that it makes sense to purchase rather than take a home on rent. The recovering job market is yet another reason behind the rising demand of houses. In fact, reports suggest that the nation gained around three million jobs.
- There are not enough homes for sale: The biggest and perhaps the saddest story of 2015 is that there is lack of inventory. In spite of the fact that the investors are no more in the market as the greatest deals during Recession are now a thing of past, normal laymen are still competing for owning too few homes. In the month of May, 2015, groundbreakings stood at an annual rate of 1.046 million.
- Too many homes are listed with higher prices: To add to the problem, the builders are focusing mostly on higher-end homes. New homes are currently selling for $25,000 more than those that were previously-owned. Nowadays, the new homes are selling for around $75,000 and this clearly means that the builders are mostly catering to the more affluent people. Among the major homebuilders, there are few who are targeting some of the low-tier homebuyers.
- People won’t be able to sell their home for a profit: One more factor that is presently holding back the current housing market is negative equity. During the end of the first quarter of 2015, 7.4 million were badly underwater which meant that the loans surpassed the value of the property by at around 25%, according to reports by RealtyTrac. This is the biggest drawback that is adversely affecting the housing market.
- Prices will rise through December: During the first part of 2014, prices were usually up between 10 and 14% year after year. But as 2014 came to an end, they reached out to a yearly gain of 5.8%. However, if you want to know what will happen this year, the answer will depend on who you ask; the experts will speak of gains ranging from 4-8%.
- Mortgage rates will go up by the end of 2015: Economists have always been predicting a rise in interest rates of mortgage but now it’s high time we take it seriously. Predictions say that a conventional mortgage rate will reach up to 4% by the end of 2015. Whatever be the rate, it is going to rise, for sure!
Therefore, if you’re someone who is wondering about the ups and downs of the housing market, you should take the above mentioned facts into consideration. Apart from mortgage debt, you may click here for all debt relief options for your unsecured debt.