REAL ESTATE TRENDS 2015

The Fiscal Times

March 27, 2015

Along with green shoots and chirping birds, one sure sign of spring is popping up in neighborhoods across the country: For Sale signs.

As the weather warms up, so does the housing market, and experts say this year鈥檚 spring selling season is shaping up to be an active one. Whether you鈥檙e buying or selling, here are the trends you need to know about.

1: Home prices are rising, even hitting record levels in some places. Home prices nationwide rose by 5.7 percent in January, compared to a year ago, with prices hitting record highs in Colorado, Texas, Wyoming, and New York.

Prices are so high in certain areas that some economists are starting to worry about localized bubbles. In most markets across the country, however, gains of around 5 percent are seen as stable, sustainable growth, a welcome change after years of roller coaster changes.

2: Mortgage rates are still low 鈥 for now. At less than 3.7 percent, mortgage rates are haven鈥檛 been this favorable to consumers since 2013. 鈥淓ven though rates are expected to rise as the year progresses, for now these rates are really at very low levels,鈥 says Greg McBride, chief financial analyst at Bankrate.com.

To be safe, once you鈥檝e got a closing date, consider locking in your mortgage at today鈥檚 rock-bottom rates.

3: It鈥檚 still a seller鈥檚 market. Total housing inventory at the end of February increased 1.6 percent to 1.89 million existing homes for sale, but that鈥檚 still 0.5 percent less than a year ago. Unsold inventory is at a 4.6-month supply, giving sellers a slight advantage in today鈥檚 market. (A six-month supply is considered a healthy market.)

4: Buyers want turnkey properties. Even with tight inventory, buyers are looking for properties that are move-in ready and won鈥檛 require much more than a coat of paint. 鈥淏uyers don鈥檛 want to assume any risk with properties that need work, particularly first-time buyers with limited cash resources,鈥 says Budge Huskey, chief executive officer at Coldwell Banker Real Estate.

5: Foreclosures are no longer a factor. After peaking in August 2006 just before the housing bubble burst, foreclosures are on pace to return to historic norms this year. 聽Foreclosure filings fells 4 percent in February to their lowest level since 2006.

6: Investors are backing off. Ordinary buyers in recent years often found themselves competing with investors聽鈥淭oday鈥檚 houses are getting less desirable for investors because price points are going higher, so it doesn鈥檛 pencil out as much,鈥 says Daren Blomquist, RealtyTrac vice president.聽The share of homes going to institutional investors or all-cash buyers dropped in 2014 to the lowest level in 4 years.

7: In most places it鈥檚 much cheaper to buy than to rent. Soaring rents in recent years have made buying a home much more affordable for those who want to stay put than renting one. Nationally, U.S. renters spend an average of 30 percent of their income on rent, versus just 15 percent of income on mortgage payments.

8: Credit is getting looser. Fannie Mae and Freddie Mac have introduced new lending programs that allow borrowers to put just 3.5 percent down on a home 鈥 although this comes with risk, of course. The Federal Housing Finance Agency recently reduced the cost of mortgage insurance by half a percentage point, which will save home buyers an average of $900 per year. All of this makes it a little bit easier for first-time buyers to qualify for a home loan. 鈥淚t鈥檚 still not easy to get a mortgage, but it鈥檚 not as hard as it was a couple of years ago,鈥 says Bob Denk, an economist with the National Association of Home Builders.

9: New homes are smaller and greener. The average new home in 2015 was expected to be about 2,200 square feet, or 10 percent smaller than the average new home five years ago. 聽Millennial buyers and downsizing boomers want a smaller carbon footprint and a more eco-friendly home with energy-efficient windows and plumbing.