Around this time of year every year, people start asking me “Where is the real estate Market headed next year?” The real estate market is affected by so many factors that predictions on what the market will do are hard, however there are some basic fundamentals that can be looked at to make a good educated guess. One of the industry experts out there that I think does a good job at this and, offers a somewhat less biased look at the market than some, is Frank Nothaft, Chief Economist at Freddie Mac. Below are highlights of his most recent report on the outlook of the housing market along with my comments relating his projection to our St Louis market:
Home Sales:
- 5.31 million total homes (new and existing) sold in 2014, a 3.6% decrease from 2013. Projection for 2015 is an increase of 5.5% to 5.6 million homes sold.
- For St Louis (the 5-county core market), I am projecting that home sales will be down roughly the same as above, maybe just slightly higher, perhaps 4%, for 2014 from 2013. I would also project an increase in home sales in St Louis in 2015 at a rate close to the rate projected by Mr. Nothaft for the market as a whole.
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Home Prices:
- Mr. Nothaft projects that home prices this year will increase about 5% from last year and in 2015 home prices will increase by about 3%.
- For St Louis (the 5-county core market), I am projecting that home prices this year will increase about 6% from last year and in 2015 we will see an increase in home prices at a rate equal to, or slightly higher, than the 3% rate projected for the market as a whole.
Interest Rates:
- 30 year fixed rate expected to end up at an average of 4.2% for this year and then expected to increase to just over 5% (5.1%) by the end of 2015 closing out 2015 with an average rate of 4.7% for the year, according to Mr. Nothaft’s forecast.
- For St Louis I would not expect rates to fluctuate from the average for the U.S.