Here is my 2015 Forecast, Round 2: For Home Buyers! I’ve been getting a lot of questions about the upcoming year’s housing market. I recently shared my perspective for sellers, and now it’s the buyers’ turn. Here are my opinions/best strategies if you are considering a move next year.
Predictions for 2015-Impact of Rising Interest Rates
I recently authored a blog post about the 2015 forecast for home loans (Read it here: http://yourexecutiveneighbor.wordpress.com/2014/11/24/2015-mortgage-market-forecast/). Rates are projected to be 1% higher a year from now and this results in an 11% loss in buying power.
As a result of this, I think the spring market will be very active. Sellers who also need to buy a home will list their homes early at the start of the season (I advise my clients to hit the market first week of February). They will want to capitalize on lower rates for their long term purchase.
“When Should We Buy?”
This is a tricky question to answer. The spring market is always competitive, as many first time buyers are buying instead of renewing leases, and those leases typically end late April or Late May. Given the rise of interest rates, this year could see more competition in the spring for those buyers looking to lock in a low interest rate.
If next year is a repeat of 2014, however, the fall could be a better time to buy. This past fall (2014) saw more inventory and less demand, which equated to better deals for home buyers. The unknown, of course, is the interest rates. Rising interest rates could push demand up as buyers feel motivation to purchase before a home becomes too expensive, which could make waiting to the 2nd half of the year more expensive.
If you are looking to buy in the spring, remember that the market starts to pick up speed right after the Superbowl (1st week of February), where we see more and more homes come on market each week. If you have a lease expiring, be ready to start looking then (after you’ve gotten your mortgage pre-approval) and to get a jump on everyone else. The fall market starts to pick up speed right after Labor Day (the summer is traditionally slower).
A final note: if you have a flexible time frame, those sellers who are looking to sell their homes and make a purchase themselves – and who need time to find their next home – may love you for accommodating a longer closing window. That can be a strong negotiating point.
Should I Buy A Home?
This is a very personal decision. One of the most straight forward ways to assess if purchasing a home is right for you, is to first assume you plan to be in Chicago for 3 to 5 years.
Next, look at what you are paying in rent and compare what you could get for roughly the same monthly payment, if you purchased a home (Contact me to help with that estimation). Even if the monthly payments of owning are slightly higher, it may still make sense to purchase, because of the tax benefits you receive as a homeowner (you can write-off you property taxes and the interest you pay on your mortgage). Additionally, you are building equity each month by paying down your mortgage, and so when you do sell, you will (theoretically) have money coming out of the home (not true if you rent).
Just this week, Curbed Chicago released a report that rents on Chicago’s north side have risen 2.8% this year. Read more here:
Are there any loan changes in 2015 that will affect my purchase?
Yes! The time frame for approval of certain mortgage documents (once you are under contract on a property) increases in 2015. While the net impact on home purchases remains to be seen, I predict we will see longer closing windows. Instead of being able to close on a home in 30 to 45 days, we will see that increase to 45 to 60 days.
Interested in Purchasing a Home in 2015?
Contact me today for a consultation so we can get started. Reach me via phone/text: 773-517-6585 or email@example.com.