Buying a home in 2015 may well be on the agenda for a growing number of potential purchasers. Low mortgage rates combined with a firming economy should help real estate sales, but at the same time markets are not all moving in the same direction and like 20014 mixed signals are in the air.
For instance, the National Association of Realtors (NAR) reports that existing home values rose 5.8 percent in 2014 but sales actually decreased 3.1 percent. On the new home front, figures from the Census Bureau estimate that single-family new home sales amounted to 435,000 units in 2014 -- that's an increase, but just 6,000 more sales than we had in 2013.
Here's another one: home values rose in most major metropolitan areas, but the improvement was hardly uniform. The NAR says values in the third quarter were up in 125 metro areas, news offset by declines in 47 areas.
Now we have a new report from Standard & Poors which suggests that 2015 is likely to see much of the same: mixed and muddled results, a few steps forward when it comes to buying a home but not enough to support claims of a full-blown recovery.
So what looms ahead? Standard & Poors, in its housing outlook report for 2015, makes five basic predictions:
First, as the economy improves, there should be more home buying interest as well as more liberal underwriting standards.
We're already seeing this: For instance, the FHA has dropped its annual mortgage insurance premium by .5 percent, a move that will product real savings for FHA borrowers. Conforming loans -- mortgages which can be bought by Fannie Mae and Freddie Mac -- are now available to first-time buyers with as little as three-percent down, a big reduction from the usual five-percent requirement.
And -- while we don't know what will happen during the rest of the year -- interest rates are near historic lows. According to Freddie Mac the typical 30-year fixed-rate loan had a 3.66 percent interest rate at the end of January.
Low rates are surely an attraction for anyone who wants to finance or refinance real estate. At the same time, low rates for buyers can be offset by soaring home values. S&P sees "slowing home price appreciation, faster GDP growth, and increased mortgage lending" in 2015, a prediction which suggests only marginal home price increases during the coming year. The good news, at least, is the idea of rising prices and not a retrenchment.
The Rise of the Nonbanks
A "nonbank" is a financial institution which does not offer checking or savings accounts, but does provide loans, including mortgages. S&P says that nonbanks will be bigger players in the mortgage field during 2015, growth which will be important to borrowers only if it means more competition and thus lower rates, a broader range of financial products and more liberal qualification standards.
Fannie Mae & Freddie Mac
Despite strong efforts in recent years to increase the sale of private-label residential mortgage-backed securities (RMBS), S&P expects that Fannie Mae and Freddie Mac will continue to dominate market. What's good for borrowers is that more capital and more competition for residential loans helps push down mortgage rates.
A Good Year Ahead
"All in all," says Standard & Poors, "Rosier economic conditions and seasoning of outstanding mortgages should be a positive for mortgage performance" in 2015. In other words, there's little chance that the economy will once-again stall as it did as a result of the mortgage meltdown but a big pick-up in terms of either home prices or sales is unlikely. Instead, the housing market with this analysis is likely to move ahead, but cautiously.