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3 Important Trends To Follow For the 2015 Housing Market

by Peter Thomas Ricci

What should be on your horizon, as the 2015 housing market begins to take shape?

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The 2015 housing market is nearly upon us, and to help you prepare in your business, we’ve described below three of the big trends that you should look out for:

1. Price Gains Slow, Affordability Worsens – Home prices will almost certainly rise at a slower rate throughout 2015. How can we be so confident? Consider this state from Trulia: in Oct. 2014, prices were up 6.4 percent year-over-year, compared to 10.6 percent in Oct. 2013 (and that’s consistent across all the major home price indices). It’s not that home prices are performing worse, but rather, the market is stepping down from its euphoric rise in 2012 and early 2013, so prices by comparison are bound to be lower.

At the same time, affordability is unlikely to improve, because even slow price increases will still outpace wage growthsavings and employment for the vast majority of Americans – and to top it all off, the Fed will probably increase interest rates in 2015.

2. The Rental Market Will Continue its Ascent – And you thought you had seen the last of the multifamily housing boom? Though November, housing starts in the multifamily sector were up 16.5 percent, and given that multifamily projects typically take nine to 12 months before they hit the market, we can be confident that thousands upon thousands of new rental units will be hitting the marketplace in 2015.

And those units will surely find renters – all the aforementioned issues on wages, savings and employment will continue to drive consumers to rent, and analysts expect household formations for Millennials to increase (basically, more Millennials are expected to move out of the basement in 2015).

3. Do Not Look for a Single-Family Homebuilding Boom – Finally, we’re coming full circle here on the single-family homebuilding side, which is unlikely to see any record-breaking progress in 2015. Why? Three main reasons:

•First, when it comes to market fundamentals, single-family construction is still pretty high – the vacancy rate, meaning the number of new single-family homes remaining empty, remains near its recession high.

•Second, the supply of buyers for new single-family properties is unlikely to increase; as we just described, if there are any new consumers looking for housing in 2015, they’ll be heading for the rental markets.

•Third, it’s not like those new consumers could even afford today’s stock of newly built single-family homes; builders, simply, have tailored their product to a safer, more affluent bunch of prospective buyers, and new home prices have soared as a result.

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