National Economic Outlook - 2015 Preview

Written By:
Ingo Winzer, President

Local Market Monitor

Despite low interest rates, low inflation, and an economy that has steadily expanded, new and existing home sales - and therefore mortgage and home equity lending - have languished. Part of the reason is a high level of consumer debt that keeps many potential buyers out of the market; another is the changing make-up of the US population, with fewer people in the first-home age range of 34 to 45. And still another is the bifurcation of income, with recent gains going largely to people who already have a high income - and a house. These things won't change rapidly.

Much of the home sales activity in recent years involved speculation in foreclosed properties, especially in markets in Florida, California and Arizona, and in Las Vegas, Reno and Detroit. Foreclosure speculation during otherwise thin demand has distorted our knowledge of the true value of an average home in many markets.

As usual, some parts of the country have fared better than others. Sub-prime foreclosures have made things worse in Georgia, Alabama, Ohio and Michigan, where local economies were already in poor shape, while new energy jobs have boosted real estate in Texas, Colorado and the shale-oil towns of North Dakota, Montana and Wyoming.

Expect much of the same in 2015. Slow demand for mortgages and home equity loans. Tepid construction, with more apartments. Low new home sales, with a tilt toward more-expensive ones. Flat or even lower existing home sales in markets where foreclosed properties have been hot.

Strong economies and real estate markets in Texas, Colorado, Utah, Oregon. Renewed demand in Florida and Arizona. Ever higher prices in San Francisco, Seattle and LA. Modest economic growth - and modest real estate markets - in the Northeast, South and Midwest.