Housing Outlook for 2015

Continued low interest rates and a growing economy helped the national housing market improve in 2014. New and extended loan programs from the federal government should keep the momentum going in 2015.

In January a sharp decline in interest rates, coupled with announcements about reductions on popular federally insured home loans, resulted in both purchase and refinance volumes at their highest in six years, according to a CNBC report. According to a Wall Street Journal report, rates on the popular 30-year fixed home loans were at their lowest since May 2013.

What does my local market look like?

The Nashville market weathered the recession better than most areas and continues to show improvement. The Greater Nashville Association of Realtors reported more than 33,000 MLS-listed homes and condos were sold in 2014, up 1.07 percent compared to 2013. And 2015 continues to show strong growth, closing out January with a total of 1,825 closings, up about 11 percent from the same time the previous year.

Similarly, the Knoxville Area Association of Realtors reported nearly 14,000 MLS-listed homes and condos were sold in 2014, up 3.6 percent compared to 2013. Homes in Knoxville are selling quicker and spending fewer days on the market. The number of listings sold within 30 days spiked to 31 percent over the previous year, and the number of listings that took more than 120 days to sell in 2013, fell 30 percent.

Affordable home options

Moves by the federal government to keep mortgages affordable should also help encourage homebuyers to enter the market.

In January, the Federal Housing Administration lowered its annual mortgage insurance premiums a half percent. For typical FHA applicants, the reduction in premiums means that monthly payments will become more affordable. The FHA estimates that this policy shift could provide opportunities for as many as 2 million first-time homebuyers and borrowers over the next three years.

Additionally, home seekers can now buy a home with a down payment as little as 3 percent. These loan programs from Fannie Mae and Freddie Mac are meant to help those whose incomes have not kept pace with rising home prices. Effective dates and other terms vary among the programs, but there are three key similarities. These loans:

• Offer fixed rates
• Are reserved for primary, owner-occupied residences, and
• Require full documentation of income, credit and assets.

These new loans will also offer refinancing provisions to existing homeowners. Refinances are picking up steam—nationally, applications are at their highest since July 2013.

Last year the Federal Housing Finance Agency extended the “Home Affordable Refinance Program” (HARP) through the end of 2015. So far this program has helped more than 2.2 million borrowers refinance.

Refinancing to a lower rate can help reduce your mortgage payments, but that’s not the only benefit. Homeowners who are in a position to make higher monthly payments could pay off their loan sooner. Or, they could change your loan program from an adjustable-rate mortgage to the stability of a fixed-rate mortgage with today’s low rates.

The millennial effect – first time home buyers

A December Financial Times survey forecasted that the number of existing homes for sale will increase, as will competition from new homes and homebuilders. It is predicted that millennials will see greater job stability and will look to establish households in 2015. This group accounted for 31 percent of nationwide home purchase transactions back in November, the largest share since October 2012. Will this mean an increase in first-time home purchases as a trend for 2015?  Indeed, with job gains and wage growth starting to accelerate, and rates as low as they are, first-time buyers are heading back into the market.

What should you do?

It can be difficult to keep up with all of the new loan programs and mortgage regulations, but a trusted mortgage advisor can help you determine which program is best for you and whether now is a good time to refinance.

Chris Avans, Knoxville market mortgage advisor, can be reached at 865-766-3002 or chris.avans@pnfp.com.          

NMLS ID: 375117

Laurel McKenzie, Nashville market mortgage advisor, can be reached at o:615-743-8289 | c: 615-480-7248 or laurel.mckenzie@pnfp.com.          

NMLS ID: 437049