It’s that time of year again when economists (and this Real Estate Problem Solver) make predictions about what’s in store for us. For what it’s worth, here’s my $.02 worth…
- The US economy is slowing. And the global economy is worse. (That makes us sound like the fastest horse in a slow horse race- but I’m not sure that saves us from a trip to the glue factory.)
- The cost to fill up your car or truck is way down. Why? Well, the cost of oil is down 50% because the world market has too much supply and not enough demand. (See #1) Over the course of the year the side effects are going to get worse. And when those operators in the shale patch start defaulting on their junk bonds (that Wall Street sliced and diced into derivatives- will they never learn?!) there’s a real risk that the financial markets are going to take some big hits. And the big banks are in worse shape than they were going into the sub-prime mortgage crisis! Not many are talking about it, but this could become very disruptive.
- On a more positive note, really LOW gas prices are freeing up some money in the family budget. Hopefully, you’re using it to pay down debt or increase savings!
- Wages aren’t likely to get a boost in 2015. (See #1 & #2) The best paying full-time jobs created in the past five years were courtesy of shale oil. Most of the rest of the new jobs were part-time service jobs which didn’t pay much and didn’t provide benefits. Be sure to make yourself invaluable!
- Millenials (those under 35) now outnumber Gen X and Baby Boomers. But, they’re not breaking down the doors to become homeowners. Many are living at home. Multi-generational homes are becoming more common.
- Rental rates are increasing due to increased demand (all the other millenials who aren’t living at home). And every day I get told “I’m tired of throwing money away on rent. I’m tired of paying someone else’s mortgage. I want a place of my own.”
- Indy (and central Indiana) continues to rank as one of the top 5 most affordable housing markets in the U.S. The median average price stands at $139 and change. That translates to a monthly payment just under $1000/month. Compared to everyone else… we’re in heaven.
- Mortgage rates are low (really low), as in 3-4%. That’s a far cry from the 18% days of some of my first houses, and half the historical average! The MBA is predicting they’ll rise to 5% this year. I have no doubt they’re going to rise, but I’m not so sure it’s this year. (See #1)
- Fannie Mae is coming out with a new, lower cash down payment mortgage (just 3%). And FHA just announced new, lower PMI rates (which will lower monthly payments).
- Surprise, surprise… mortgage money is available. (Call me, I know a guy!)
And speaking of surprises… we’re sure to see some. So, be like a Boy Scout!
What the housing market was about used to be all about what was happening in your neck of the woods. While that’s still important, to get the whole story you need to know a whole lot about what’s going on in places like Russia, China, Europe and Japan, and let’s not forget about Wall Street, North Dakota or Capital Hill. Not everyone has time to do that. But this is my business. Long ago, I learned that we can’t control a lot of what is going on in the market, but we can get smart and make smarter plays. So, if you’d like to get the full scoop— just ask!