Projections predict strongest home sales since 2007
Many leading analysts are now predicting a robust home-selling year in 2015. Here's a quote from Len Kiefer, deputy chief economist at Freddie Mac:
"This month kicks off spring home-buying season. Between now and the end of June, we'll see about 40 percent of all home sales for the year."
It's that optimism that has Freddie Mac forecasters expecting 2015 "to be the best year for home sales and new-home construction since 2007, when total home sales were about 5.8 million for the year," according to their U.S. Economic and Housing Market Outlook for March, as reported by the National Association of Realtors.
An improving job market is driving young professionals, ages 25 to 34, back to the labor force. The millennial age group now has 76.8 percent of its generation employed, as of last month, up from 75.9 percent last year.
Freddie Mac economists predict that rents will continue to rise at or above inflation this year, which will likely push more prospective buyers into homeownership. Rents rose 3.6 percent, on average, in 2014, and are up nearly 11 percent over the past three years, according to Freddie Mac's report.
Meanwhile, Freddie Mac economists expect the 30-year, fixed-rate mortgage to rise slightly this year to a 4-percent average. The 30-year fixed-rate mortgage averaged 3.86 percent at last report.
Q. Are homeowners who took a line of credit some time ago about to reach a point where their credit is due to be reset?
A. One reporting service released its first HELOC Resetting Report, which found that 56 percent of the 3.3 million home equity lines of credit potentially resetting with higher, fully amortizing monthly payments from 2015 to 2018 are on properties that are seriously underwater.
The firm used average HELOC utilization rates from the New York Federal Reserve and the prime interest rate of 3.25 percent to calculate the outstanding balance of the loans and to calculate the interest-only and fully amortizing monthly payments.
Q. Are home sales increasing?
A. Yes, sales are edging up with difficulty. Existing-home sales increased modestly in February, but constrained inventory levels pushed price growth to its fastest pace in a year, according to the National Association of Realtors.
Total existing-home sales, which are completed transactions that include single-family homes, townhouses, condominiums and co-ops, rose 1.2 percent to a seasonally adjusted annual rate of 4.88 million in February from 4.82 million in January. Sales are 4.7 percent higher than a year ago and above year-over-year totals for the fifth consecutive month.
Q. Are more apartments being built to accommodate the rising demand for rentals?
A. Yes. One indication of that growing niche in the market is the strong growth of mortgage applications to finance the construction and purchase of apartment projects. Total commercial/multifamily debt outstanding stood at $2.64 trillion in the fourth quarter of 2014, an increase of $48.9 billion, or 1.9 percent, over the third quarter, according to data collected by the Mortgage Bankers Association.
Commercial/multifamily debt outstanding increased at the highest rate since the fourth quarter of 2007, as three of the four major investor groups increased their holdings in the fourth quarter. On a year-over-year basis, the amount of mortgage debt outstanding at the end of 2014 was $119.5 billion higher than at the end of 2013, an increase of 4.7 percent.
Q. Are underwater homeowners getting relief in today's improving market?
A. Many of those owners are now experiencing new problems. Owners of homes at the bottom of the market are trapped underwater on their mortgages even as the real estate market continues to recover, according to the Zillow Negative Equity Report.
That's because low-end homes - those most likely to be upside-down - are losing value.
At the peak of the real estate crisis, more than 15 million homeowners owed more on their mortgages than their homes were worth, putting them in negative equity. Foreclosures, short sales and rapidly rising home values freed nearly half of those homeowners, but now that trend has reversed in many metros.
Three years into the recovery, home values overall continued to recover, while owners of the lowest valued homes - those most likely to be stuck in negative equity - were left behind, it was reported by Zillow.
• Email Jim Woodard at storyjim@aol.com.
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