As the year comes to a close many analysts and economists begin looking at various information to determine how things will change for the new year. While this is not an exact science, the experts have developed formulas to provide an overall picture of the upcoming financial events. Generally speaking, it seems that business will improve for the real estate industry in 2015.
An improving real estate market foreshadows a healthier economy. People don’t buy homes unless they have stable jobs and income. A strong, growing economy is great for people in general, but not so good for mortgage interest rates. Here are some real estate related indicators that could suggest an improving economy and therefore higher 2015 mortgage rates.
New Homes All Across the Land
The National Association of Home Builders recently had their webinar for forecasting construction numbers in the fall. During the webinar David Crowe, who is their chief economist, stated that he expects a 26% increase in the overall number of single family homes. Currently there are 637,000 under construction and his forecast puts the numbers at 802,000 by the end of 2015.
The primary economist from Moody’s Analytics, Mark Zandi, chimed in and felt that Crowe’s numbers were too low. Zandi is predicting the number of new homes under construction to reach 1,000,000 houses before 2015 comes to an end.
What is Driving the Optimistic Outlook?
In general terms, the growth in jobs is pushing the forecasts to such optimistic levels. Zandi stated that each month our economy is adding approximately 225,000 new jobs. That pace should greatly reduce the unemployment numbers and yield more people in search of a home.
It is a good rule of thumb that the United States is considered to be at a level of complete employment when the number of people out of work is only 4.5% of available workers. Based on the current projections of job growth it is possible that unemployment could be down to 5.5% when 2015 ends.
The number of current homes available for sale is slightly above 1 million properties, if looked at over a one year period. With the number of new jobs increasing steadily the necessary homes for sale will need to improve greatly.
New Homes and New Jobs lead to More New Mortgages
Based on the job growth figures and the pending home construction numbers most mortgage experts are predicting a large increase in applications for home purchases.
Overall, the number of new home loans should increase by approximately 15% for the year 2015, according to the Mortgage Bankers Association economist Michael Fratantoni. At the same time, Fratantoni feels that refinance loans will decrease by about 2% to 3%.
2015 Interest Rate Prediction
Trying to predict the exact change in the 30 year fixed mortgage rate is not always accurate but Fratantoni, along with many other experts in the industry, feels that rates will likely climb to 5% and possibly 5.5%.
Barring any major catastrophe it appears that the worst of the American recession is behind us and brighter days are ahead for the next year.
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Source: Luke Skar, MadisonMortgageGuys.com