Everyone wants to know what’s in store for the housing market in 2015 and as a result, there’s been no shortage of real estate experts offering their predictions during the last couple of weeks.
Most believe 2015 will be the year things finally “smooth out,” after several years in which home prices rose so quickly many would-be buyers left behind. That may not be the case this year. One expert who believes the U.S. housing market will become more balanced is Stan Humphries, the chief economist of real estate data site Zillow.
Humphries recently told the Los Angeles Times he expects home prices in the U.S. to rise by 2.5% in 2015. That would be quite a slowdown when you consider home prices rose by 6% across the U.S. during the past 12 months.
Of course, the Los Angeles housing market has seen even bigger price appreciation the past few years. Humphries does not break-out this region in his comments, but most observers agree that price appreciation will slow quite a bit in the L.A. market as well. The last few months, in which price gains have slowed in L.A., indicate that’s likely to be the case.
Humphries believes the slower pace in price growth will mean more first-time home buyers will come to the market in 2015. That would be a pleasant development for the housing market. There are a couple of reasons that could be the case, according to Humphries. First, home builders are beginning to construct more houses at lower price points. Second, the price of renting continues to go up. He predicts rent prices will rise an additional 3.5% in the U.S. As a result, what Humphries calls “otherwise content renters” will decide to take the leap into home ownership.
“This more balanced market will be smoother sailing for everyone,” Humphries said. “Both for buyers in search of a competitive advantage and for sellers who turn around and become buyers themselves.”