In a November 30 article by Brena Swanson for Realtor.com, she outlines 5 trends for real estate in 2015. They look really good for most of the country, but particularly for the Midwest. I paraphrase and analyze them below:
- The two most active age groups will be the millennials and the boomers. Historically, the people in this age group have been the most active in real estate purchases and sales. But the millennial group, in the last 10 years, has been slow to purchase their primary residences. Recent reports show that trend is turning around and now they appear to be taking part in the American dream of home ownership.
- Millennials will be particularly active in the Midwest. Minneapolis, Des Moines, Omaha, Madison and Columbus are 5 cities where they will be the most active. My daughter and her husband (both 30 something) just made an offer on a home last week in Des Moines. I believe the fact that interest rates have bottomed out and that they are predicted to rise next year, will bring a lot of this age group into the market for the first time. Remember the recent interest rates have been kept artificially low and historic rates are considerably higher.
- The appreciation rate for homes is expected to slow to about 3.9 %. Now understand, the prediction is for positive appreciation, just not as high as in recent years. Historically, real estate has shown an appreciation of 2% to 4% and that is a rate which I believe is sustainable in the long run. The recent increases in the 5% to 8% range annually is not sustainable and would have eventually created a bubble. This slowdown is actually good news because, again in my opinion, it indicates that real estate will remain a great long term investment.
- The tight inventory of homes will remain, for buyers, the biggest hurdle. Yes, buyers will not have an endless supply of cheap houses to choose from, as they did during the real estate recession of 2006 to 2012. But the good news is that we are not in a recession.
- Western US cities will continue to dominate the price increases with appreciation of 5.8 as an average. In my opinion, that is a rate that borders on being unsustainable in the long run. And areas like Las Vegas, Phoenix, Denver and areas of California have always been areas subject to more volatile markets. Minnesota and the Midwest, over the long run, 80 years or so, have been much more stable and great places for long term home appreciation in general.
If you would like to read more about this and the article by Ms Swanson please go to the Real Estate News tab at my website, Mnhomesbydave.com. There are also the most recent local market stats under the How’s the Market tab. Thanks for reading. Dave