Home Sales to Increase 9% in 2015

The U.S. real estate market is expected to improve, based on sales, in 2015. However, the improvement is unlikely to cause a bubble. According to research firm CoreLogic, home sales will rise 9%.

Home sales alone are not the only segment of the housing market that will improve, according to CoreLogic:

Home sales will increase by 9 percent in 2015, housing starts are expected to grow 14 percent and home price growth is expected to moderate.

Less expensive homes are expected to dominate sales, a sign that people with modest incomes and people buying starter houses continue to be drawn into the market, due to an improvement in the economy, and likely to extremely low mortgage rates as well. CoreLogic experts point out there are other reasons:

The lower-end home price category is growing faster than the higher-end price category in the top 25 U.S. markets, reflecting tight supply and lack of new construction.

All markets are not created equal. Those where people have high incomes and where incomes are likely to rise will be the top markets in terms of home price increases:

The organic nature of a market is reflected in our list of top 10 home price appreciation markets. Four of the top 10 markets, including San Francisco, San Jose, Austin and Seattle, have high concentrations of technology industries with employment growth increasing at a 2.8-percent rate from a year ago as of October 2014, roughly twice the national rate.

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Despite the drop in oil prices, cities that depend on the energy market for their health will continue to do well, at least in the real estate sector:

Two of the top 10 markets, Dallas and Houston, have been thriving due to strong energy markets and strong household growth over the past few years. Houston, in fact, is the most interesting market to watch in 2015, given that home prices are elevated and in context of the large decline in oil prices. As of October 2014, the Houston metro area had experienced more residential construction than all but two states, which is a reflection of the city’s very strong in-migration and employment growth. While the energy producing sector will be hurt by lower investments due to lower oil prices, Houston is enjoying a demographic dividend that will sustain it.

Finally, some real estate activity is seen in cities in which construction is robust:

While single-family construction has stagnated nationally, there are some markets that are exhibiting strong sales growth for new builds. These markets include Raleigh, Charlotte and Charleston in the Carolinas and Houston, Dallas and Austin in Texas. While each of those markets is exhibiting healthy home price growth, solid new construction builds are helping to alleviate prices from increasing further.

The housing boom has been among the primary drivers of the economic recovery. Apparently, it will be so again in 2015.

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