Students studying outside the library
2015’s Healthiest Housing Markets

Philip G. Swicegood
R. Michael James Family Professor of Finance at Wofford College
WalletHub (http://wallethub.com/edu/healthiest-housing-markets/14889/#philip-g-swicegood)

Is now a good time to buy? What economic indicators should potential buyers watching? 

 

  • Yes, now is a very good time to buy a home for three reasons.
  • Interest rates are still near historic lows, with most experts believing that rates may soon move modestly higher sometime in the next year.
  • Lenders’ appetites for making mortgage loans have returned to healthy levels.

 

As shown by the S&P/Case-Shiller Home Price Index, home prices in most parts of the country have been trending upward at a modest pace for the past few quarters, so waiting for lower prices is probably counter-productive in most areas. Potential home buyers should be watching the unemployment rate, CPI, GDP, and the Case-Shiller Index for hints about housing prices and market loan rates. Potential home buyers who delay will only have higher interest rates and higher home prices to contend with.

How likely is it that the Federal Reserve will increase interest rates in the coming months? How will this impact the housing market?

As long as inflation remains below 3%, the unemployment rate does not increase, and overall GDP growth remains above 1.5%, then there will be greater imperative for the Federal Reserve to raise rates within the next 6 months, perhaps as early as next month.

Why is the Millennial generation missing so much from the housing market? What can be done to increase homeownership rates for this cohort?

I think four reasons are holding Millennials back from the housing market.

  1. Millennials have taken on more personal debt from non-housing sources (e.g., student loans), so they have less borrowing/repayment capacity.
  2. Many Millennials’ parents are less in a position to assist their children with down payments on home purchases because of the parents’ poorer financial picture (e.g., higher debt loads and inadequate retirement savings).
  3. Millenials are forming households later in life so the impetus to buy a house is being deferred.
  4. Having watched their parents struggle with foreclosures and imploding retirement accounts, Millennials are very cautious about making the largest purchase of their life.