When home sales unexpectedly plummeted in November, the housing recovery entered the new year stuck in neutral. Will sales switch gears and get revved up in the new year, regaining the roar of two years ago? Or will they putt-putt along as they did in the pre-recovery years, every leap forward followed by a tire-burning skid?
Economists making predictions for the year ahead are basing their forecasts on the single factor over which no one in the housing industry has any control: the national economy. Yet it’s hard to deny how import the economic climate will be this year. If jobs drop and gloom returns to the stock market, lenders won’t loosen their standards very much, Millennials won’t tear up their leases and decide this is the year to buy and move up buyers won’t cash in their equity for something bigger.
When comes to opinions about the national economy in the months to come, some see the economic glass half empty and others, like NAR’s Lawrence Yun, see it half full.
Existing-home sales are forecasted to rise about 7 percent in 2015 behind a strengthening economy, solid job gains and a healthy increase in home prices, according to National Association of Realtors®, says Yun. Despite his forecasted increase in sales, Yun cites the anticipated rise in interest rates, lenders being slow to ease underwriting standards back to normalized levels, and homeowners unwilling to move because they are comfortable with their current low interest rate as potential speedbumps that could slow the increased pace of sales this year.
Yun expects total existing-homes sales to finish 2014 around 4.94 million (down 3.0 percent from 2013), but then rise to 5.30 million in 2015, a 7.2 percent annual increase. The national median existing-home price for 2014 will be close to $208,000, up 5.6 percent from 2013, and is expected to moderate to a pace between 4 and 5 percent in 2015. Realtor.com’s Johnathan Smoke is just as optimistic. He sees existing home sales increasing 8 percent and prices rising 4-5 percent.
No one is more optimistic than CoreLogic, whose economists predict sales will rise 9 percent in 2015, housing starts will increase 14 percent and home price appreciation will moderate. Key is employment growth in the millennial age cohort, which will herald the return of the first time homebuyer.
Less sanguine is the Kiplinger financial publishing house, which forecasts that home prices nationally will rise by 3.5 percent in 2015, at the low end of the historical range of 3 percent to 5 percent annual appreciation (before inflation). Kiplinger also expects existing-home sales to increase 8 percent in 2015 (after declining 2 percent in 2014) and new-home sales to rise 25 percent in 2015 (after a meager 4 percent rise in 2014).
Also on the low end is Freddie Mac’s Frank Nothaft, who sees prices appreciating at an average of 3 percent in 2015 and sales will end up about 5 percent, which would still be the best sales pace in eight years.