I believe that the real estate market will make a comeback in 2015 — but it will do so in spite of the terrible economic environment and the government. (Please don’t confuse what I’m about to say with any credit you might hear taken by a politician or the government. Politicians are confounding the market by adding excessive regulatory controls and new taxes, to name just a few hits.)
What reasons do I have to be so optimistic? Here they are:
Millennials will be buying homes in 2015. In its October 2014 report, “15 Economic Facts About Millennials,” the Council of Economic Advisers says millennials are “the cohort of Americans born between 1980 and the mid-2000s, are the largest generation in the U.S. and [represent] one-third of the total U.S. population in 2013. With the first cohort of millennials only in their early 30s, most members of this generation are at the beginning of their careers and so will be an important engine of the economy in the decades to come.”
Many millennials have had difficulty finding good jobs in the last few years; as a result, they have been renting — many times with multiple roommates — or they have been living at home with their parents to save money. Neither condition is satisfactory to them. These young people are smart, tech-savvy, very social and frustrated. When they get together at social gatherings, they usually discuss their living arrangements with the words “for now” or “temporarily.”
As the job market improves this year, millennials will be the largest group of buyers to hit the market.
Baby boomers are looking to move in 2015. “Downsize” is the key word to use when discussing real estate with baby boomers in 2015 and beyond. The kids have left home (or they’re about to leave home), and the house is too big — not configured for a new lifestyle.
As my wife pointed out to me, a five-bedroom, four-bath home for two people is too much. We are beginning to plan our next house, which will support our new lifestyle, where kids and friends are visitors — not residents.
Beginning in 2015 and for the next few years, baby boomers will downsize with a purpose. Planning for their new lifestyle will take them to new designs, single-level living, exercise rooms, music studios, wine cellars and indoor-outdoor kitchens. It will be an opportunity to re-engineer how they live. Wow! This will be an exciting time for the boomers.
Homeowners who faced foreclosure in 2006-2007 could be ready to try again. Although FHA (Federal Housing Administration) and VA (Department of Veterans Affairs) loans require a much shorter seasoning period following foreclosure, conventional loans require seven years to season from completion date. Beginning in 2006, the initial wave of foreclosures hit Northern Virginia due to a downturn in the real estate market with inflated home values. During this time period, most option ARMs (adjustable-rate mortgages) also ran their course. However, the sluggish economy, unemployment and underemployment have led to a resurgence of foreclosures. Foreclosed homeowners who remained in the market from that time to now are most likely renting their homes. Some of these people would be interested in buying now that interest rates and prices are lower. This year will be the start of that trend in buying.
Tom Donegan is broker/owner at Re/Max Premier.