Monday, January 5, 2015

My Annual 10 Real Estate Predictions For The New Year

By: Jay Burnham

Every January I post what I believe will be the trends in real estate for the coming year. Here is what I expect in 2015...

1. Interest rates will likely be on the rise this year and inch up to 5% by the year end. I was wrong on this one in 2014, but who wasn’t? I’m taking a chance on rational economics again.

2. Home prices will cool off. They’re already doing so as homes aren't selling at the rate they were in 2013. The near double-digit gains of that year are gone, but that’s actually good for the health of the overall market. Nationally, as 2014 wrapped up, home appreciation slowed to about 4.5 percent. Expect appreciation to drop further to an average 3 percent in 2015.

3. Expect home-building to ramp up this year. It is projected to rise by 20 percent from last year. That will likely help total home sales to climb by about 5 percent, reaching the best sales pace in eight years.

4. Expect many builders to shift to less expensive homes, providing new construction to a larger pool of buyers and, as a result, more and faster sales.

5. Foreign investors will still find high-end American real estate appealing because of economic turbulence in their home countries. That section of the market is still all cash – people buying up expensive properties because it’s safer here than in their own countries.

6. Mortgage originations of single-family homes will likely slip by an additional 8 percent, which can be attributed to a steep drop in refinancing volume. Refinancings are expected to make up only 23 percent of originations in 2015; they had been making up more than half in recent years.

7. 2015 may be the year first-time homebuyers make a comeback. With rents rising faster than incomes, many Millennials are expected to start looking to buy homes of their own.

8. Baby boomers are also likely to make a move in 2015. Many are downsizing, and moving to be closer to their children or grandchildren. With fewer homes underwater, they’re finally in a position to sell.

9. On the commercial side, expect multifamily and industrial properties, two strong sectors in 2014, to remain so again in 2015. While spec construction of big industrial space has returned, the problem is that there’s only so much land where more can be built. Even so, the cost to own buildings compares favorably to leasing in many situations.

10. Overall, improving economic factors will provide more people the needed income to buy. Job growth creates housing growth. More prospective buyers will be able to ditch renting in favor of buying a house for the first time, both new and resale in 2015.

It will be a good year.


Jay Burnham is a Premier Associate at Coldwell Banker Residential Brokerage in Beverly, MA. He is a past president of the North Shore Association of REALTORS and has been honored as the Association’s REALTOR Of The Year. He has been a real estate broker for 33 years and has sold more than $300 million of residential and commercial real estate. He lives in Hamilton with his wife, Linda Morey, manager of the Topsfield Coldwell Banker office.