Real estate experts are divided over the state of the housing marketDate posted: 12/19/14 11:45:00 AM
Real estate professionals seem split regarding the potential of the nation's housing market in 2015. Some think it will get better, and others believe it could get worse, according to The Wall Street Journal.
One of the biggest hurdles is affordability. Housing markets in certain parts of California along with a few other major metro areas are exorbitantly high in price, leaving many buyers with no way to secure a home.
"We have an affordability problem again," John Burns, CEO of a home builder consulting company, told the Journal. "The market is flat."
But there are a few positives, which is why experts remain split on the topic. The National Association of Realtors reported home sales increased 0.8 percent from October 2014 to November 2014 and 4.1 percent year over year in November 2014 on a seasonally adjusted basis. That's the best year-over-year improvement for the index since August 2013.
Lawrence Yun, chief economist at NAR, said the surge in signed home contracts in November 2014 helped balance the housing market to a certain degree.
"The consistent economic growth and steady hiring we've seen the second half of this year is giving buyers enough assurance to consider purchasing a home before year's end," Yun said in a press release. "With rents now rising at a seven-year high, historically low rates and moderating price growth are likely to entice more buyers to enter the market in upcoming months."
Still, lending standards are relatively tight, leaving many would-be buyers on the sidelines. And Yun seems a bit more optimistic than others in the industry. Glenn Kelman, chief executive of real estate brokerage Redfin, believes the residential real estate market is still relatively fragile, especially when compared to pre-recession days.
"The market overpriced itself this year, and buyers are very price sensitive right now," Kelman told the Journal.
Lethargic home demand, rising prices and a shortage of quality inventory have forced many potential homebuyers to hold off on a purchase.
However, Nela Richardson, chief economist at Redfin, expects the residential housing market to be a little less competitive in 2015.
"Homes that had four offers now have one," Richardson said, adding there is "a lot of price pressure in a really small number of neighborhoods."
A key segment for the housing market
One important element to the success of the housing market is the formation of new households, which typically results in new purchases.
Reuters reported household formation has averaged just 600,000 per year since 2007, though that number is slated to reach 850,000 in 2015, the highest output since 2006.
Household formation is directly linked with financial stability, so if the job market improved, that number could go even higher. Reuters reported per capita incomes are starting to climb at a modest rate, and the employment-to-population ratio of Americans aged 18 to 34 is up to 69 percent after dropping to 65 percent in 2011. The high for that demographic is 73 percent, which was in 2007.
Certain regions doing better than others
NAR's Pending Home Sales Index increased the most in the Northeast and the South in November 2014. The Northeast garnered a 1.4 percent increase from the previous month and sat seven percent higher than the same time a year ago. The South notched a 1.3 percent improvement month over month and a 5.1 percent gain on a year-over-year basis. Pending home sales also improved 0.4 percent on a monthly basis in the West.
The Midwest recorded the only drop, falling 0.4 percent from October 2014 to an index of 100, which is 0.5 percent below its level from November 2013.
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