In this latest episode of our current look at the real estate market next year, we will consider some likely key influences on the Albuquerque real estate market in 2015.
Growing Domestic Economy - Throughout 2014, the US economy has been showing increasingly positive signs that there is something of a return to the good times before The Great Recession. Steady job market growth, an annual Gross Domestic Product (GDP) increase just shy of 4% and a real estate market once again in rude health – these are all significant indicators of a renaissance for America.
Experts are predicting that the overall value of construction spending will rise by as much as 9% in 2015. Project financing is expected to become easier and, even better still, the increases are expected to come from a very wide range of work, with significant growth anticipated in the office, institutional, single and multi-family housing and public sectors. More homes, more schools, more highway and bridge refurbishment/construction – these are all big job and wealth creators, of course, so the real estate market stands to greatly benefit as a direct result.
Housing Market Momentum - The Albuquerque real estate market is enjoying a very lively end to the year. In October (the latest stats currently available), single-family detached home sales rose by 4.8%, compared with 2013, while pending sales increased by 9.06% over the same period. This provides an extremely good outlook for the coming months and a golden opportunity for sellers to capitalize on the very real opportunities that growing demand presents. Although inventory of available homes has been rising lately, no doubt in response to positive market conditions, there is still room to grow, not least because the absorption rate (how long it would take to sell all the current inventory) has been falling since mid-summer, due to high demand. Less inventory means less competition, so why wait until the new year before listing?
Mortgage Rates - We make no apologies for mentioning mortgage rates yet again in a blog, because, right now, the average 30 year home loan rate is below 4% and actually cheaper than this time last year. This incredible performance has seen buyer sentiment sky rocketing as rates have plummeted. It cannot last forever, of course, indeed analysts expected rates to rise in 2014, but this didn't happen for a variety of reasons. While generally enabling more people to become home buyers, the rapidly improving domestic economy will very likely see investors taking more chances during 2015, with the result that "safe haven" investments such as Mortgage Backed Securities may not be so attractive, with a resultant possible rise in rates.
As we near year end, our strong advice remains the same for buyers and sellers alike - don't wait until the spring and expect rates to be as low as at present. Yes it may happen, but current predictions suggest that the 30-year rate will be at 5% by the end of next year - rates simply have to start rising at some point.
Increased rates may not seem like good news for anyone, but remember that rises usually accompany periods of economic growth, which is very good news in counterbalance, of course. To give some perspective, in the 2000's they averaged 6.29%, 8.12% in the 1990's and a staggering 12.7% in the 1980's - even the predicted 2015 rise to 5% would still be very cheap, historically speaking.
Growing Influence of Millennials - Over the past decade or so, housing market growth has been kept in check by the simple fact that the now older "Baby Boomer" generation has long settled down in homes and is not moving very often. Expert predictions suggest that 2015 will see the rise of "Millenials" looking for a place of their own, rather than renting. Over the next five years, this younger generation is expected to account for two thirds of household formation, so this has real potential to help boost prices due to much higher demand from a growing pool of home seekers.
We hope the above trends provide you with some interesting food for thought as you plan your home selling and/or buying strategies for next year. Call us today for more specific advice related to your individual circumstances.