We’re looking at what could be the best year for home sales since 2007. Don’t believe me? Just look at what Len Kiefer, Deputy Chief Economist, is saying: “This month kicks off the spring homebuying season. Between now and the end of June, we’ll see about 40 percent of all home sales for the year. So these next few months will essentially tell us whether or not 2015 will be a good or bad year for housing markets. Overall, we’re feeling good about housing and we expect this year to be the best year for home sales and new home construction since 2007.”
Also backed by Freddie Mac’s economists and their Economic and Housing Outlook that was just released, 2015 is being forecasted at 5.6 million sales and 1.18 million housing starts. Compared to 2007’s 5.8 million sales, the market hasn’t fully reached those statistics but is well on its way. Still don’t believe me? Let me reassure you with these three reasons: affordability, demand, and credit availability.
With nearly 80% of the metro markets in the U.S. continuing to be affordable and fundamental drivers such as payment-to-income and price-to-rent ratios showing to also be stable, most markets have home values that are sustainable. One misleading factor is the dip in interest rates. January reported a fall by 0.75% from the previous year, but is still rebounding as time passes.
With this said, the key driver of the housing market this term will be the household income factor. Across the past year, the economy has added 3.3 million jobs, and is on it’s fasted boost since 2000.
Stay with me here, the better the job prospects are for Millennials, the household formation and housing demand will rise. That’s a strange correlation isn’t it? But as Millennials aged 25 – 34 begin to see their job prospects rise, the employment-to-population ratio rises alongside it. This percentage has increased to 76.8%, which is the highest it’s been since 2008.
With an indication of higher housing demand in rental markets this year, rent rates will increase. With higher rent rates, lower mortgage rates, and slightly lower home prices, we might start to see younger professionals buying houses instead of renting.
Regardless of prospective home buyer’s financial situations, they are still likely to buy based on the wide availability of credit on the market today, according to Freddie Mac. Even though another hurdle is always the down payment, with lower mortgage rates and rising job growth, creditworthy borrowers will see this become less of an issue.
With all these indications pointing toward the best year for home sales since 2007, what will you do to jump on board with this trend?