In an effort to figure out where the real estate market is headed in 2015 I reached out to a Realtor who probably has a pulse on the market as much as anyone given his years of experience. While trying to figure out where real estate is headed is always a difficult task, Bill Gassett, a top Realtor in Milford Massachusetts, has been through both seller’s markets and buyer’s markets. Here is my interview with Bill.
Should a prospective home buyer purchase a home today, even if they may be in a better position to do so in twelve months?
Tim first let me say thank you for the opportunity to speak with your audience – it is much appreciated. Your first question is a very good one and actually a tough one to answer. My first instinct is that it is always better for a buyer not to make the jump into home ownership until they are completely ready to take on that fiscal responsibility. But I do see most markets around the country ascending further than they are now.
This is where a buyer needs to really go over their finances and determine whether waiting would make more financial sense. The X factor is interest rates. As you know right now they are extremely attractive and almost gotten back to record low territory. When interest rates jump it certainly affects a buyer’s purchasing power. If I were a betting man I would put my money on higher rates next year. When you look at the big picture it would make sense that if a buyer feels they are ready to purchase financially they really should give strong consideration to doing so. Not only will they lock in a low interest rate but more than likely build equity as home prices increase.
One of the most important things a buyer can do however, before they even consider putting a deposit down on a home is to understand how to prepare to get a mortgage. Buyers should realize a lot of time and energy goes into being prepared to take on homeownership.
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Will home prices be higher in twelve months or do you see a temporary dip coming?
It is hard to predict other areas of the country but in my own area of Massachusetts I expect prices to remain fairly consistent over the next six to nine months. I do not see a big dip in values or a rapid increase in market values. What I predict is a very small gain more than likely to occur in the spring of next year.
In my neck of the woods there have been some towns that have been stronger than others. Certain price points and towns have lower inventory levels than others and this has kept values moving in a positive direction in these communities. We also see other places that are not quite as strong and inventory might be a little more plentiful. Real estate sales are always driven by things such as location and desirable schools. It is those communities that have these factors going for them that are continuing to thrive. From what I read, other areas of the country mirror this pattern.
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Home buyers are having a tough time due to lack of inventory. Will sellers come out of the woodwork next year, making more homes available?
I do expect we will see more sellers putting homes on the market but the bulk of this inventory increase won’t happen until the spring of 2015. There are a number of owners that are just starting to come back into the black after having little or no equity. With market values continuing to rise over the last year and a half I expect more people to enter the market. There are also some folks who will see the opportunity to make a move up as long as the interest rates continue to remain low.
Will there be fewer short sales and REO properties on the market next year, and if so, how will that affect home prices? Will there still be deals out there?
I can only speak for my market on this one. We have already seen a rapid decline in the number of short sales and foreclosures. We never had a tremendous amount to begin with compared to other areas of the country but just enough to keep things interesting.
Short sales were actually a very large part of my business up until last year. These types of distressed homes have become a much smaller part of the real estate landscape. I am going to guess with the economy, labor and stock markets all continuing to show slight improvements that distressed sales in other areas of the country will taper as well. There will still be deals but not nearly as many as there have been over the last few years.
We’ve seen high home appreciation since 2012. Will it be wise to buy in 2015 or has this ship sailed?
Frankly as mentioned above I don’t see the market shifting dramatically one way or the other so no I don’t think the ship has sailed. Buying a home should be a long term decision unless you are a fix and flipper looking to make a quick buck. As long as a buyer has studied their finances and know they will have no problems financially making their payments, I still see a great opportunity to get into the home ownership arena. Interest rates are at historic lows and property values are still way off their historic peaks of 2005.
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Do you have any final thoughts for buyers considering purchasing a home in the next six to twelve months?
One of the most important things to consider is to know exactly what you are getting yourself into. There are many buyers who will naturally think about the fact they will be paying a mortgage, home insurance and taxes but oftentimes forget about all the other expenses that come along with owning your own property.
When you are purchasing a home you should never forget there will be extra home buying expenses that you didn’t plan for. As a new home owner there should be additional money set aside not only for all the standard costs associated with buying a home but the incidentals as well. Many new purchasers forget about these things and end up being house poor to the point where they become a slave to their property.
Tim thanks again for the opportunity to share my expertise on where the real estate market is headed in 2015 and some helpful tips for those who will be jumping into the market!