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   ARTICLE   |   From Scotsman Guide Residential Edition   |   January 2015

What’s on the Horizon in 2015?

Mortgage originators should brace themselves for this year’s industry changes

Now that we’ve bid farewell to 2014, it’s time to examine a few potential trends for the 2015 housing market. Mortgage- industry experts across the country have weighed in with various opinions and predictions, and a number of those predictions in particular stand out. Here’s a closer look at nine trends that the market may experience this year.

1. Home prices will continue to rise. Through September of 2014 national home-price averages increased about 5.4 percent over 2013, according to the National Association of Realtors. Economists and housing market analysts expect home prices to continue this trend, and some are projecting an increase of an additional 5 percent to 5.7 percent in 2015. This continued, slow rise is a positive sign to many industry insiders.

2. Foreclosure inventory will continue to decline. The number of home foreclosures spiked when the housing market crashed and remained high for many years thereafter. Starting in late 2013, however, signs of normalization began to appear as foreclosure rates began falling. Some industry experts are predicting that 2015 will be the year that foreclosure rates finally reach normal levels again. If this holds true, the impact will be visible via positive signs in home-value prices, purchase prices, refinance rates and in the ability for more homebuyers to qualify for loans.

3. Lending rates will hover around 5 percent. Freddie Mac is projecting interest rates to increase this coming year, although these will remain at favorable levels for homeownership. The government-sponsored enterprise is expecting the average rate for a 30-year loan to rise gradually and reach about 5 percent by the end of 2015.

4. Inventory growth could slow appreciation. The topic of housing inventory will push into the forefront of trends to watch this coming year and could impact multiple factors, such as home prices and new-home starts. Over the course of 2015, many expect that the inventory shortages of 2014 will come to an end, bringing competition and lower sale prices to center stage.

5. Baby boomers and millennials will stay put. This country’s nearly 80 million baby boomers occupy about 32 million single-family homes, according to Fannie Mae. Although an increasing number of these people are becoming empty nesters, they’re choosing to stay in their homes longer for economic reasons. Millennials, meanwhile — who also number nearly 80 million — are choosing the more affordable option of renting instead of buying homes. In fact, this group will spend about $600 billion on rent over the next five years, according to the Demand Institute.

6. Refinances will decline. Historically low interest rates over the past four years produced a booming refinance market, but refis are about to be tapped out. According to CoreLogic, less than a quarter of existing mortgage holders have a high enough interest rate to be attracted to refinancing. Freddie Mac reports that refis were down about 60 percent from 2013 to 2014 and expects a further decline of 50 percent from 2014 to 2015.

7. Closing a mortgage could be easier. Effective this Aug. 15, the Consumer Financial Protection Bureau (CFPB) will introduce new mortgage closing requirements aimed at making the process more transparent for buyers. With many banks and brokerages implementing e-closing solutions to deal with these new requirements, the CFPB’s new rules also may mean less paperwork for homebuyers and originators.

8. Condominium sales will continue to surge. According to CoreLogic, condo sales began to rebound last year, accounting for about 12.3 percent of all home sales in 2014, as of this past September. CoreLogic reports that Naples, Florida; Houston; and Denver are the three fastest-growing condo markets in the country, while Las Vegas; Honolulu; and Orlando, Florida are on the decline. Many of this past year’s condo deals were all-cash purchases made by investors or second-home buyers. These demographics could be affected if interest rates rise in 2015, although sales are still expected to be significant as millennials drive the rental market.

9. Mortgage-credit rules won’t loosen. Despite some talk about lowering FICO scores to make it easier for certain buyers to qualify for loans, many industry experts believe that stricter mortgage regulations are creating a tight credit market, which isn’t likely to change anytime soon. Many buyers also are carrying a large load of nonmortgage debt that is affecting their ability to qualify for home loans.

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With an improving economy, rising interest rates and new rulemaking all on the table for 2015, this year promises to be another period of change for the industry at large. Originators who keep an eye on the market and all its developments can prepare themselves for whatever the future may bring. 


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