Speaking at the 2014 Realtors Conference and Expo, NAR chief economist Lawrence Yun forecasted that home sales for calendar 2015 may reach 5.3 million. That would be an improvement over the 4.9 million units expected to be sold in the current calendar year, and the 2013 figure of 5.1 million existing homes sold. In 2016, existing home sales may remain firm, as they are forecasted to reach 5.4 million two years from now. As for home prices, the NAR predicts an increase of approximately 4 percent next year.
According to Yun, improvements in the U.S. employment market has resulted in buyers feeling “more confident,” while the increase in home prices has helped homeowners rebuild their equity and be confident of selling their properties after sitting the fence in the aftermath of the global recession.
However, he warned against certain variables that may serve as an albatross to drag the housing market down. Yun said one of the statistical variables is the NAR Realtors Confidence Index, which is currently down in calendar 2014, though reduced realtor confidence may in fact be due to strict lending standards and inventory constraints in certain parts of the U.S.
“Multi-family housing starts have rebounded back to normal since the downturn mostly due to the strong demand for renting,” said Yun. “On the other hand, single-family housing starts are still lagging as smaller homebuilders continue to face difficulty obtaining construction loans, and some have even gone bankrupt. Single-family construction still needs to increase to alleviate supply shortages and keep up with the pent-up demand.”
Yun also pointed out that the continued prevalence of renters, specifically in the so-called “millennial” demographic, is another possible source of drag to the housing market. Since 2010, renter households have increased by four million, while homeowner households have conversely declined by one million.
“The typical homeowner today has a household net worth of around $200,000,” Yun observed. “Meanwhile, renters aren’t benefiting from the rise in prices and are facing annual increases of their own in the form of higher rents.”
Speaking about the trepidation many millennials feel when it comes to entering the housing market as first-time buyers, he said that several variables are responsible for this, on top of a shortfall of inventory and a market generally friendly to renters; these include stringent credit requirements, student loan debt, and a higher number of multi-generational households.
Yun also offered some interesting comments on the broader economic prospects of the United States, and how they may affect the housing market. He believes that inflation may push the U.S. Federal Reserve to increase short-term, or overnight rates in the first half of 2015, which would result in mortgage rates on 30-year products rising to a shade below 5 percent in 2015 and hitting 6 percent in 2016.