First-time homebuyers should make a splash in 2015Date posted: 11/7/14 11:15:00 AM
The nation's housing market started slow after being blasted by cold weather and frigid buying conditions in 2014, but the coming year could be much different. According to a forecast from Zillow, 2015 is shaping up to be a great year for all kinds of potential homebuyers.
Stan Humphries, chief economist at Zillow, expects 2015 to buck the slow real estate trend. He believes it will be the first year in quite some time that young adults will be pushed toward buying instead of renting.
"Since the recovery began in earnest in late 2012, buyers have really taken it on the chin, forced to contend with low inventory, tight credit, bidding wars and intense competition from investors and all-cash buyers," Humphries said in a release. "But next year, we'll start to see things really turn around. More inventory will continue to come on line, putting the competitive pressure on sellers for a change."
Humphries said a more balanced market will greatly improve the health of the real estate industry. Young adults won't face the same type of stiff competition for homes they have seen in years past. Meanwhile, sellers will have a chance to trade-up for a bigger or better home because of more first-time buyers in the market.
More millennials in the housing market is a good thing
New homebuyers are incredibly important to the housing market because they give existing homeowners more options to potential buyers when their home is on the market.
The report from Zillow suggested by the end of 2015, millennial buyers (under the age of 35) will be the largest group of homebuyers in the country, passing Generation X (35 to 50 years old) buyers.
Humphries stated 42 percent of millennials want to buy a home within the next five years, which is 11 percent higher than Generation X over that same span.
"The lack of homebuying activity from millennials thus far is decidedly not because this generation isn't interested in homeownership, but instead because younger Americans have been delaying getting married and having children, two key drivers in the decision to buy that first home," he said.
Which market has the most potential for first-time buyers?
According to the report from Zillow, Pittsburgh should be the top housing market for first-time buyers in 2015.
"The current numbers in almost every category are better year to date than they were last year," Tom Hasck, CEO of Northwood Realty Services, told the Pittsburgh Post-Gazette. "Obviously, if that six-month trend continues - and we see no reason why it shouldn't - we should end 2014 with a pretty good year."
Pittsburgh is a hot market for young adults because of strong job growth and relatively cheap housing. The city is also home to a slew of universities.
Rounding out the top five cities for first-time homebuyers were Hartford, Connecticut, Chicago, Las Vegas and Atlanta.
Zillow graded these markets based on income growth, the increase in entry-level homes and first-time homebuyer affordability. The real estate site ranked the 50 largest metro markets in the country and didn't include markets where entry-level inventory stalled by at least five percent over the past year.
Home values versus rents
The rise in rents compared to home values might also push young adults into the housing market. Zillow predicted rents will rise 3.5 percent in 2015 on a nationwide scale compared to just a 2.5 percent climb for home values.
Humphries said a more stable housing market could spur "otherwise content renters" into house hunting, as more people would rather spend their money on a monthly mortgage loan than pay a landlord.
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