2015 Real Estate Trends
This is a guest blog post from Ian Bradford, the director of sales and co-owner of Apex Realty in Livonia, Michigan.
With the New Year comes the feeling of hope, aspiration and a striving to better one’s self. Of course, bettering one’s housing situation may be at the top of that list. Whether the goal is to purchase a home for the first time or the tenth, this is always a big step.
2014 brought about many changes in the market. Housing continued to appreciate, sellers gained equity, buyers began to improve their credit worthiness and new lending programs, such as the FHA Back to Work program, opened the door of opportunity for many. These real estate trends will continue to open the door of opportunity in 2015, especially for first-time homebuyers.
Renting vs. buying
One trend that remains constant from year-to-year is the “rent vs. buy” debate. With the housing market trending upwards through 2015, is it still worth it to buy? Yes! Indeed it is.
According to Zillow, the median value of homes has risen to the tune of 10.4% in the metro Detroit area over the last year, with expectations to grow another 3.6% in 2015. With that being said, the median listing in metro Detroit is $139,900. According to Freddie Mac Chief Economist, Frank E. Nothaft, with the quicker pace of economic activity, the Federal Reserve will allow long-term interest rates to drift a bit higher, but fixed-rate mortgages are estimated to stay below 5%.
So what does this mean to the average buyer looking to purchase in 2015? If you compare the cost of a 30-year mortgage payment to the cost of rent, using $139,900 and 5% interest in your calculation, the monthly principal and interest payment of $751 beats the median rental price in the Metro Detroit area of $875.
Another trend sure to affect 2015 is that while overall credit worthiness seems to be increasing (allowing more buyers to enter the market), funds to close and cash flow are decreasing. For example, more Millenials are entering the workforce after graduating college and becoming mortgageable. However, lack of savings due to little time on the job is a real problem when needing to shore up funds to close.
There are still low down payment programs out there that can help, such as the FHA’s 3.5% down payment program and the MSHDA down payment assistance program. Buyers can even try negotiating seller concessions to go towards a portion of their closing costs. New for 2015 is a program that has been announced by Fannie Mae and Freddie Mac that allows for as little as 3% down on a conventional mortgage.
Another change in 2015 affecting cash flow is that FHA will be reducing its monthly mortgage insurance premium by 0.5 percentage points, reducing the monthly average premium from 1.35% to 0.85%. For example, if your loan amount were to be $200,000, you would save $83 a month with the new premiums.
So, what’s the bottom line? Even though times are changing, there is still plenty of room to accomplish your goals of homeownership in 2015.
Ian Bradford is the director of sales and co-owner of Apex Realty in Livonia, Michigan. Apex Reality has a team of dedicated professionals that are passionate about helping buyers and sellers with their homeownership needs.