The short answer is "Rock Solid". The average Beavercreek home is worth $12,000 more this year than last. I expect the same thing to occur in 2019. I watch the market in real-time and am thrilled to share the latest info with you via email/text/cell.
The new year is well under way—and the outlook on the housing market is definitely brighter. After all, 2016 was the best year in the U.S. economic recovery since the recession of 2008-2009.
With an accelerating economic recovery fueling job and income growth, prospects are good for homeowners and would-be home buyers.
1. Mortgage Rates Will Head Back Up
The flip side of the improving economy is that (sigh) mortgage rates will inevitably head up again. We’ve had a great run, but the honeymoon is over, and it’s time to settle in for a relationship that balances job growth with higher-but-still-reasonable interest rates.
The Federal Reserve has indicated it will increase the federal funds rate 3 times in 2017—which has an indirect but significant effect on mortgage rates. The rate has remained artificially low since December 2008.
2. Millennials Will Set Up House
The millennial generation is beginning its ascent—and no, not all of these youngsters born between 1981 and 2000 are living with their parents as they struggle to pay off student loan debt. Sure, they’ve faced huge challenges in the job market, but employment is improving, and older millennials are planning ahead.
About 65% of first-time home buyers are part of this older millennial group (ages 25-34), Smoke noted, pointing out that these young adults are at an age when many marry and start families.
“Millennials make up around 65% of first-time home buyers,” Smoke said. “Of the millennials who are buying a home, 86% indicate that their motivation is a change in family size.”
But with tough credit qualification standards and limited credit history, he added, millennials are expected to buy more in affordable areas in the Midwest and the South.
More than two-thirds of household growth in the next five years is expected to come from millennials, according to Smoke. This generation is bigger than the baby boomer generation, so even though its youngest members will be only 15 in 2015, the market is only beginning to feel its impact.
3. Builders Will Break New Ground
Although total housing starts (construction on new housing units) barely broke 1 million in 2014 and was driven by multifamily homes, Smoke noted the pace will pick up in 2015 and shift in focus.
“We are forecasting 16% growth in starts, driven now more by growth in single-family starts, which we are expecting to grow 21%,” he said.
But shortages of labor and building product material will limit further growth in single-family construction and will keep overall supply tight.
“The constraints on new construction supply factor into our assumptions about existing home sales growth and overall tight supply of homes for sale,” Smoke added.
4. Credit Will Continue to Be a Major Factor
Strict mortgage qualification standards are keeping many consumers, especially younger ones, from buying a home with a bank loan. This situation has remained about the same for the last four years, although it’s possible that various new federal housing policy initiatives might help loosen those standards in 2015.
If not, it will increasingly become clear that lack of access to credit is holding back the housing market.
“If you just look at the distribution of credit scores, at least 10% of current homeowners with mortgages would not qualify for a new mortgage today,” Smoke said.
Opening up access to credit would be a game changer in the housing market, Smoke noted, allowing 500,000 to 750,000 would-be buyers who are now cooling their heels to achieve the dream of homeownership.