This is re-blogged from Realtor.com:
Despite decreasing affordability for houses next year, expect more home sales in 2015 — in part due to increased purchases by millennials who are finding jobs and expanding their families.
The unemployment rate for Americans between 25 and 34 hit 6.1% in November, the Labor Department reported Friday. That’s the lowest level since July 2008.
In general, jobs for those younger than 35 years old are being created at a faster pace this year, said Jonathan Smoke, chief economist of Realtor.com, which released its 2015 housing forecast earlier this week. Realtor.com is owned by News Corp., as is MarketWatch.
“The tired old story that millennials are unemployed and living with their mom and dad — those circumstances have changed quite a bit in 2014,” Smoke said.
What’s more, we’re at the beginning of a mini baby boom, prompting more millennial parents to seek homes large enough for them and their offspring, Smoke added.
The last huge spike in births was in 2007, when a record high number of births were reported (4.32 million), according to data from the National Center for Health Statistics. For the first half of 2014, the growth trend is looking similar to that year, Smoke said. And if the trend holds, there could be more than 4 million births in 2014 — putting it in the top 25 years for births since 1909, when records began — “but more importantly setting the stage for an even bigger 2015,” Smoke said.
“Housing is driven by life,” Smoke said, “and [members of] the largest generation in history are coming into their own.” The median age of a millennial is 24; the older half of the generation is now between the ages of 25 and 34, as Smoke defines it.
Of active millennial home shoppers surveyed this summer, 86% said the primary trigger for purchasing a home was because they had a change in their household size or were anticipating one, according to a home shopper survey of 1,236 participants by BDX, which operates the nation’s largest network of new home web sites. BDX is a joint digital marketing venture between Move Inc. (the News Corp. subsidiary that runs Realtor.com), and Builder Homesite Inc. About 32% of millennial buyers said they were planning to increase their family size, and 18% said their family size had already increased.
That said, the affordability of homes is expected to decline 5% to 10% next year, according to Realtor.com’s 2015 housing forecast. That’s due to expected home price appreciation (prices are expected to be up 4% to 5% next year, compared with 2014) and rising mortgage rates (expected to rise mid-year, with the 30-year fixed-rate mortgage reaching 5% by year’s end). Luckily, the increased cost of buying a home will be at least somewhat offset by rising incomes, he said.
Still, the rise in mortgage rates will likely mean more people exploring adjustable-rate mortgages, which offer lower initial rates than fixed-rate mortgages, Smoke added. With rates on fixed-rate mortgages currently so low, only 9.8% of all conventional mortgages for the purchase of a single-family home in the third quarter of 2014 were adjustable-rate mortgages, according to the Federal Housing Finance Agency.
Smoke is forecasting an 8% increase in existing-home sales next year, 16% growth in home starts (21% growth in single-family home starts), and a 25% increase in new-home sales. The homeownership rate should decline slightly, though the rate of homeowners younger than 35 years old should increase, he added.
The top 10 markets for housing growth next year, according to Realtor.com: Atlanta-Sandy Springs, Ga.; Dallas-Fort Worth-Arlington, Texas; Denver-Aurora-Broomfield, Colo.; Des Moines-West Des Moines, Iowa; Houston-The Woodlands, Texas; Los Angeles-Long Beach, Calif.; Minneapolis-St. Paul-Bloomington, Minn.; Phoenix-Mesa-Glendale, Ariz.; San Jose-Sunnyvale-Santa Clara, Calif.; and Washington, D.C.