CoreLogic: U.S. home sales expected to increase 9% in 2015

HOME SALES are expected to increase by 9 percent in 2015, and home price growth is expected to be moderate, according to CoreLogic's 2015 housing outlook report.
HOME SALES are expected to increase by 9 percent in 2015, and home price growth is expected to be moderate, according to CoreLogic's 2015 housing outlook report.

PROVIDENCE – Home sales are expected to increase by 9 percent in 2015, and home price growth is expected to be moderate, according to data firm CoreLogic’s 2015 housing outlook report.

CoreLogic said that the lower-end home price category is growing faster than the high-end price category in the top 25 U.S. markets, which reflects a tight supply and shortage of new construction. Also, the firm said that markets with the highest home price appreciation reflect “fundamental strengths of their economies, particularly technology and energy.”

CoreLogic said that employment grew at an average of 2 percent on a year-over-year basis for the three months that ended Nov. 30, which was the strongest rate since the three months that ended in March 2006 – the peak employment growth of the last economic expansion.

The most important economic trend, according to CoreLogic, was the improvement in employment growth for millennials, as the 25- to 29-year-old age group experienced a 3 percent increase in job growth, which is 1 percentage point higher than the overall employment growth rate.

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CoreLogic said this is good news, because this age group represents the key first-time homebuyer group.

The economy grew in 2014 as oil prices began to slide, said CoreLogic, noting oil prices have dropped 45 percent since June.

“This downdraft provides even more economic growth tailwind heading into 2015,” CoreLogic said.

“In December, mortgage rates dipped below 3.9 percent for the first time since May 2013 when rates spiked and led to a slowdown in sales in the second half of 2013 and first half of 2014. While rates are still very low, home prices are not. It is clear that the low-rate environment has benefited home prices, as price-to-income and price-to-rent ratios are high. This indicates home price growth going forward will be fairly muted,” CoreLogic said.

CoreLogic said that in 2015, home sales are projected to increase to 5.8 million, a 9 percent gain from 5.3 million in 2014. Total housing starts are expected to reach 1.1 million in 2015, a 14 percent year-over-year increase. The 30-year fixed mortgage rate is only expected to rise to 4.3 percent from 4.2 percent in 2014. Mortgage rates should not increase much, as inflation is low, CoreLogic said.

The effects of the local economies is reflected in CoreLogic’s list of top 10 home price appreciation markets. Four of the top 10 markets, including San Francisco, San Jose, Austin and Seattle, have high concentrations of technology industries with employment growth increasing at a 2.8 percent rate from a year ago as of October 2014, roughly twice the national rate.
Two of the top 10 markets, Dallas and Houston, have been thriving due to “strong energy markets and strong household growth over the past few years,” the report said.

“Overall, the economy finally appears to be gaining enough momentum to help provide the support that the housing market has needed for stronger recovery. The combination of stronger employment growth and especially millennial job growth makes for solid footing for the real estate market. Moreover, the recent drop in oil prices cannot be overstated, because not only does it directly lower the transportation and home energy costs for households, but it also improves consumer confidence. And confident consumers are more likely to spend on big ticket items, which is sweet music to the ears of the real estate market,” the report reads.

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