In recent years, home value growth has been around 6%, however, it is expected to slow to around 3% in 2015. With the median sale price of U.S. single-family homes and condos in October reaching its highest level since September 2008, investors are predicted to be backing away from the feeding frenzy caused by the recent price appreciations and foreclosure market. Instead of the bidding wars seen in some parts of the market recently, home inventory should rise in 2015, creating a much more balanced market.
Investor activity has been slowing and this trend is expected to continue. Also, buyers are not as worried about missing their dream home, feeling more confident that another equal or better house will come on the market soon. Foreign investor activity is expected to continue at the current pace or even increase. This is due to either tax laws or other regulations in home countries, uncertainties with currency fluctuations, and the U.S. market feeling safer than their home countries.
Two big demographic trends will occur next year as well. Millennials have been primarily renters, postponing home ownership longer than previous generations. However, Gen Yers are now starting families and seeking security. Millennial buyers will represent the largest group of home buyers by the end of 2015, taking over from Generation X.
Another important demographic that should be making an impact on the real estate market is baby boomers. Baby boomers are ready to make their long awaited move. Baby boomers are moving closer to a son or daughter, grandchild, or downsizing. With less homes underwater, they are ready to sell.
The other side of the coin is the residential mortgage market. Mortgage rates may not remain at historic lows. As foreclosures and short sales age out of credit reports, more people may qualify for home loans. Also Freddy Mac and Fannie Mae, industry leaders, may ease mortgage eligibility standards. Freddy and Fannie recently announced a new program with a down payment as low as 3 percent.
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