What To Expect For The Second Half Of 2015
The housing outlook for the second half of the year is all about affordability - for buying and for renting. How bad will it get, and how much will it hurt the recovery in home sales? Home prices are still rising, but at a slower pace than this time last year. That cannot be said of mortgage rates, which are now on a straight trajectory up.
The short supply of homes for sale shows little sign of improving, which is keeping prices high. At some point, however, higher mortgage rates will hit affordability and could trump that short supply in taking the heat out of home prices.
Homebuilders have not ramped up production that much this year, and they are unlikely to surge ahead in the next six months. They want to hold on to their pricing power, and they are hampered themselves by tight credit and an acute shortage of skilled labor. Builders are also still not back into the speculative game; they are building only for contract buyers. There will be gains in new construction, but not enough to make a serious dent in the supply problem.
Renters are unlikely to see much relief either. There has been more multifamily construction of late, and more deliveries of new units, but demand is growing faster. Occupancy is at a record high, and that gives landlords strong pricing power.
Renters do not appear to be turning into buyers, at least not in sizable numbers, and the second half of this year will see no change in that. High rents make it harder to save for a down payment, and even as more new households form, the vast majority of these residents are renters.
The biggest change in the second half will likely be a sharper focus on mortgage credit availability. Lenders are facing new regulations that will make them ever more careful; rising rates, however, will make them hungrier for business. Independent lenders will likely take on an even bigger share of the pie, as they tend to be more flexible and creative with credit.