Economists and analysts across the country are predicting 2015 will be the year when the real estate market completes its recovery and begins to thrive again! At the end of 2014, there was a nationwide increase of job growth due to employer confidence and housing inventory. Both of these trends are expected to continue into 2015 and factor in with low interest rates, real estate prices for buying and renting, and first-time home buyers to create a healthy, revived market in Wellesley.
According to the latest Associated Industries of Massachusetts Business Confidence Index, employer confidence in December 2014 hit its highest level in the state since July 2007, just before the onset of the Great Depression. In fact, employer confidence during the entire fourth quarter last year matched levels not seen since before the recession. Massachusetts employers added 321,000 jobs in November 2014, sending the unemployment rate tumbling to 5.8 percent (from 10% in 2007). This is great news for the real estate market because job security and company growth makes people more confident about taking on mortgage debt which moves first-time homebuyers into the market and families hesitate to upsize off the fence.
From January – October 2014, home prices rose 4.5% nationally, as compared to the same time period in 2013 when home prices rose 11%. Many economists see this slower price appreciation as an opportunity for a buying surge in 2015. This decelerated growth in home prices may be creating an affordability opportunity that will attract buyers in early 2015. Add in a combination of steady or increasing income, decent savings from the surging stock market and low interest rates and it’s easy to understand why people will jump into the market.
"With rents now rising at a seven-year high, historically low [interest] rates and moderating [home] price growth are likely to entice more buyers to enter the market in upcoming months," says Lawrence Yun, the National Association of Realtors' chief economist. Add in the tight Boston inventory and we have very good news for the Wellesley real estate market which will benefit from this anticipated suburb migration.
In December 2014, Fannie Mae and Freddie Mac eased down payment requirements for first-time home buyers, allowing them to put down as little as 3%. This change will allow young buyers who are low on cash but have healthy credit ratings to qualify for mortgages. "If access to credit improves, we could see substantially larger numbers of young buyers in the market," said Jonathan Smoke, chief economist for Realtor.com. According to the Census bureau just 36% of Americans under 35 own a home, as compared to 42% in 2007. Many economists predict the reduced down payment could finally encourage many Millennials to stop renting or to finally move out of their parents’ basement.
The continuing climb in mortgage interest rates and a widening spread of the rates between adjustable-rate and fixed-rate loans which we wrote about in May 2014 did not continue for the year. Rather, interest rates headed down, not up, and are hovering around record lows. Real estate observers now predict that the Fed won’t boost interest rates until mid-2015 and only ½% to 1% higher. This paves the way for buyers to enjoy low interest rates through the spring 2015 market.
2015 is full of promise for the Wellesley real estate market. Employment confidence, economic growth, reasonable home prices and favorable interest rates make this spring an excellent time for both buyers and sellers to get in the market. Those conditions in addition to high rents and millennial access to the market translate into real opportunity for the real estate market to return to its pre-recession health.