I just returned from the 2015 Keller Williams Family Reunion. The vision speech from Gary Keller enlightened me as it always does. The following information provided will help you decide if the time is right for you to sell or buy a new home.
Home sales started out slow nationally but returned to a healthy trend once the first quarter was over. The median price increased 5.8% nationally and 3.1% in the Amarillo area. We appear to be nearing the end of the bounce back effect on home prices and moving toward a long term growth period. Home inventory loosened in 2014 which eased price growth back to sustainable levels. Mortgage rates averaged 4.17% in 2014, up 19 points from last years average. Rates balked most economist predictions and trended downward for most of 2014. The percentage of a typical family’s income increased only slightly in 2014, helped by the fall in interest rates and the slower growth in home prices. Despite the small increase in 2014, affordability remains well below the historical average due to low interest rates.
2014 was the strongest year since the recession for improvement in the unemployment rate. Now that the unemployment rate has dropped much closer to a normal level, 2015 will likely see the conversation begin to shift from unemployment to wages. Unemployment dropped 1% in 2014. Inflation will be important to watch.
As Europe faces deflation, the Fed will need to make sure it does not spill into the U.S. economy. In the last few years, banks began to loosen standards back toward normalcy. The third and fourth quarters of 2014 saw the largest number of banks loosening credit standards since the recession. In 2014 the percentage of sales made up of distressed properties declined more slowly as we moved into a more normal market. More homes continued to reach positive equity in 2014; however, this effect was substantially less than last year as home price growth slowed and we moved away from a recovery and back toward a fundamentally driven market. In 2014 the Federal Reserve ended its quantitative easing program, due to general improvement in both the economy and the labor market. This year they will have their first opportunity to consider raising interest rates. Single-family home construction increased 5% in 2014. While this makes 2014 the best year for construction since 2007, it still keeps us well below the historic average. Oil prices have declined close to 60% since June 2014. Cheaper energy prices showed a boon to U.S. consumers and a tailwind to the U.S. economy in 2015. Between 2003 and 2014, the total amount of student loan debt more than quadrupled, going from $241 billion to $1.1 trillion—a 356% increase. 71% of recent graduates had student loans, with balances averaging $29,400. At 6.5%, that is a payment of $333 per month.
So what does this mean for you. Interest rates are predicted to rise in 2015. Those of you on the fence should act quickly. For sellers, when interest rates rise, the number of buyers will be less for your home. For buyers, when interest rates rise, the sales price you are approved for will be less. This is a great opportunity to sell and buy at record low interest rates.
For First Time Buyers:
Lending Requirements Loosened
1. FHFA* is lowering the minimum down payment requirement from 5% to 3% for certain buyers:
First-time home buyers
Families in underserved areas
Low to moderate income borrowers
FHA lowers MIP from 1.35% to 0.85%.
By increasing access to credit, these measures will increase demand in the housing market,
especially from first-time home buyers.
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