The Year Ahead
The real estate industry in 2015 will experience the best year since 2006. Assuming no unforeseen disasters, every sector of real estate will perform better than at any time since prior to The Great Recession of 2008-09.
U.S. Economy Projected to achieve an annual growth rate of 3 percent in 2015, substantially above that of 2014 and outperforming the growth of many other developed nations. However, the rising value of the U.S. dollar will cause an adverse impact on U.S. exports, pending expected economic growth in consumer countries.
Long-term Mortgage Rates Slipped below 4 percent in November, but not expected to drop to the record 3.31 percent in 2012. Projected to rise in 2015, subject to Federal Reserve policy on inter-bank loans, which is expected to achieve a higher rate in mid-2015, thereby causing mortgage interest rates to rise above 5 percent causing a marginal inflation increase and motivating banks to extend credit to modest-income borrowers.
Housing Sales The National Association of Realtors reported an October 2014 increase of 1.5 percent in existing home sales that is expected to continue into 2015 as bank credit is expanded to modest-income households. New home sales also will benefit from this credit expansion, effectively halting the slide in national homeownership and modestly spurring builder sales nationwide—10-15 percent above 2014 production. This increase will generate rising sales of building materials, appliances and furnishings, thereby causing a modest increase in consumer spending and support for a stronger economy.
Rental Apartments The boom in apartment occupancy and lease rates, partially generated by declining household formations and credit limits on low-equity households, will slow in 2015, but continue to support new construction, especially in Sunbelt states buoyed by growth in the numbers of retirees and employed empty-nesters. Assisted Living facilities also will continue to emerge in concert with the aging of the baby boom generation.
Commercial Development Residential growth throughout the nation is already stimulating new commercial development, although the era of enclosed shopping malls has given way to more cost-effective open-air village developments, many with rental apartments adjunct to retail and entertainment facilities. This trend should continue with the improving economy in 2015.
Industrial Development Economic growth, coupled with latent demand accrued during the past six years of uncertainty, will fuel industrial development in 2015. Land zoned for this expectation has been lying fallow and pricing remains attractive, but expect inflation to affect prices during the latter half of the year.
In sum, 2015 promises to be a good year to be in the real estate development business. I hope your plans are coming to fruition. If not, Parker Associates stands ready to provide assistance toward optimum returns in the year ahead. Please ask about our comprehensive development marketing package through the Real Estate Marketing Alliance.
If you would like to explore further details on this or other blog articles, please contact Dr. David F. Parker at (904) 992-9888, or firstname.lastname@example.org or go to www.parkerassociates.com to read more about what Parker Associates can do for you.