Experts Predict Real Estate Prices and Mortgage Rates to Rise Slowly in 2015

Experts Predict Real Estate Prices and Mortgage Rates to Rise Slowly in 2015

The year 2014 had been a sluggish year, and while there were a few positive results, they were insignificant. However, the year 2015 could be more profitable for real estate traders and investors.

The lethargic real estate market will slowly arise and continue on that direction for the rest of 2015, picking up from where it last left off late last year. Prices decelerated from January to September last year, and only loosened up 1.8% in October, rendering the December 2013 rate of 10.8% with a huge gap against the September 2014 rate of 4.8%.

As housing inventory eases and investors exit the market, inflation in the real estate market takes a halt. Trulia chief economist Jed Kolko said that 2012 through 2014 had been the rebound years, but now that period is over and home prices will begin to soar by at least 2.5%, not so much as last year’s rise.

When rising home prices continues, it becomes less affordable to buy and own a property. Realtor.com forecasts that affordability would fall by 5% to 10% this year. Despite the sluggish rise in prices, affordability issues will heighten, Kolko said. He pointed that higher mortgages will erode affordability.

The rising prices could be attributed in part by the continued demand for housing close to offices and workplaces. Nobel-prize winning economist Robert Shiller explained that there have not been many single-family homes constructed so owner-occupied housing has remained flat. However, there is the so-called “millennial mismatch” a term coined by Kolko to mean the Millennial generation preferring to live where construction is difficult or homes are expensive.

Mortgage rates will rise to 5% at the end of 2015, according to the Mortgage Bankers’ Association. In contrast, Freddie Mac’s chief economist Frank Nofthaft said the rise will only be 4.5%. Last year, most of the mortgage rates were either flat or decelerating.

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