Challenges for Home Buyers in 2015
What does the housing experts predict for 2015? Would it be a great year to sell or buy homes? Would it be a productive year to invest in properties? It has been nine years since the housing bubble had peaked and a few years when the prices of houses rock-bottomed. Does the boom and housing bubble bust are still casting shadow on the trends shaping the housing market? By the look if it, it seems the rebound effect is fading by small measures. There is almost a whiff of normalcy to the price levels and price changes and there is a decline in foreclosure inventories. Housing market is, therefore, inevitable gearing towards a sustainable mix of home sales. It is no wonder that more and more industry surveys are predicting 2015 to be a better year than 2014, especially when it comes to selling a home.
The market is shaped by economic and demographic forces that includes growth in job opportunities, rise in incomes and household formation. 2015 is witnessing new growth opportunities and new jobs on the rise for the millennials with unemployment taking a backseat. The scenario implies that there is an inevitable surge in housing demands. So, it seems quite likely that homeownership would also enjoy some optimism in the market. Does that mean that buying a home is devoid of any challenges? Well, despite the waves of optimism that the housing market is riding on, challenges for homebuyers still persist and there are yet many barriers to overcome.
1. Saving for a down payment: With aggressive rents, it is extremely difficult for the millennials to save the money for down payments. This is especially discouraging for the first-time home buyers in spite of attractive prices in many areas. Even with all the rebound hype, the down payment amounts are still way too high for the buyers to consider homeownership.
2. Home affordability worsens due to low income growth rates and high mortgage interest rates: Housing price gains are likely to slow down and with more houses expected to come out on the market in 2015, the prices are going to take a further dip. Unfortunately, this dip in the price gains in no way implies that home ownership will be affordable, it is as likely to take a backseat as it did in past year. Sounds contradictory? Well, the reason for affordability to worsen in 2015 are two-fold. Firstly, the rate of income growth is not as sharp to quickly outpace the decrease in price, however slow that is. And secondly, the fed is signalling to push the mortgage rates in view of solid economy that the market is witnessing. “Realtor.com predicts that home affordability will decrease by 5%-10% in 2015.” And “The Mortgage Bankers’ Association predicts that mortgage rates will rise to 5% by the end of 2015.”
3. Mortgage: Even for people who have a steady job and fall into the high-income bracket, mortgage underwriting can be an extremely tedious task and quite hard to secure. And young millennials with fresh jobs, no savings and perhaps with not a great credit to show, mortgage is definitely playing a spoilsports in buying a home. Mortgage insurance also adds to the costs even if there are low down-payment options available.
While these economic and demographic driven challenges feature top on the list of today’s home buyers, getting hold of a trusted and reliable real-estate agent can also get into the way of buying a home. It is advised to find a good realtor who can simplify the steps and ease the road that is leading to homeownership.
All the same, with the new generation on the driver’s seat and with a greater demand in housing needs, we should expect the housing market to make substantial progress in 2015. Market trends suggest that this might be one of the most productive years to buy a home despite the challenges for home buyers.