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Especially in the Bay Area. But you already knew that. Redfin found that since 2001, the average amount of time homeowners stayed in their current residence more than doubled from 4 to 10 years, creating less opportunity for first-time home buyers. Low rates and improving economic conditions boosted demand in 2015, but also caused homeowners to refinance under historically favorable terms and to invest in improvements rather than move.
Here are some Bay Area highlights of Redfin's findings:
Economists have been predicting a rise in interest rates all year, but this time they might not be crying wolf. The Commerce Department is expected to report that personal income and spending rose in October from the month before. This bump, along with the better-than-expected jobs report, could boost the Federal Reserve's case for hiking interest rates this December for the first time in 10 years. Perhaps the best Cyber Monday deal would be to lock in a rate before it inevitably goes up!
Interest rates will rise as the economy bounces back. John Williams, president of the Federal Reserve Bank of San Francisco, says the Fed will likely raise interest rates later this year and continue to raise them gradually in the coming years. After a weak first quarter, he expects unemployment to go down and the economy to improve through the rest of the year.
As a general rule of thumb, strong economic signals usually indicate future increased rates, and vice versa. So while interest rates remain low, it's the perfect time to consider that MVP lifestyle by snagging this Jack London Square penthouse that Stephen Curry used to live next to! (Curry with the spot??) Rent prices will go up. If you're a renter living without that proverbial security blanket called rent control, I come bearing bad news: rents, which are currently rising at a 7-year high, will continue to rise faster than home values. As renters continue to pour more and more cash into the dark abyss of indefinite monthly payments, economists expect that a fixed mortgage payment, a more stable housing market, and future equity may be enough to entice otherwise content renters to rethink their options and enter the housing market.
Home appreciation rates will decelerate. Just as we saw last year, the growth of home prices will continue to slow dramatically. Sellers will not have as much of the upper hand as they once did before, creating a more balanced housing market that more buyers can participate in. Mortgage rates will increase. For years, economists have been saying mortgage rates will rise. And in those same years, we've been seeing consistently low rates. BUT, this year could be the year they finally get it right. Since keeping interest rates low after the financial meltdown, the Fed has indicated a coming change. Mortgage rates are expected to modestly increase in the summer, up to 5% by year's end. The next generation of homebuyers. Experts predict that specifically the millennial demographic (18-35 years old) will soon stop renting and start buying. Their home-buying activity has been lackluster thus far, putting the share of first-time home buyer sales at a 27-year low. It's not that millennials are uninterested in homeownership, as many critics would accuse them of. It's that many of them have been waist-deep in student loans, feeling the longer-term effects of the recession in terms of employment and income, and much slower to get married and have children than earlier generations. But as maturity settles in and makes them settle down, along with the help of the low down-payment programs introduced in December (3% down!), they're expected to take over the title from the GenX cohort (35-50 years old) as the largest group of homebuyers this year. So there you have it - our 2015 housing forecast in a nutshell. I'll check back with you in a year to confirm how right (or wrong) these projections actually are. Because...
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