By Jeffrey S. Detwiler, President and Chief Operating Officer, The Long & Foster Companies

Whether you’re a real estate investor, a potential home buyer or a homeowner hoping for a rise in property values, the state of the housing market in 2015 will have an impact on you. While each local real estate market is different, the strengthening U.S. economy, positive forecasts for job growth and continued low interest rates are combined forces that bode well for a balanced, healthy housing market this year. For example, existing home sales should follow a pace similar to 2014, if not a little stronger, and new construction sales are expected to increase.

Positive economic indicators abound

One of the key elements required for home buyers is confidence in their own job stability and in the strength of the overall economy. Both GDP and employment reports have been on a positive trajectory in the past year, and they are anticipated to continue improving. We’re also seeing wages increase, and consumer confidence reached its highest level since 2007 at the end of last year. Additionally, declining gas prices resulted in easier cash flow for many Americans at the start of this year. In fact, personal consumer spending rose in the last quarter of 2014 to the highest levels since 2006—thanks to the public’s confidence in the market. Optimistic consumers are more likely not only to spend money on goods and services, but also to enter the housing market, thus stimulating the economy further.

New mortgage opportunities make homeownership more affordable

Historically low interest rates continue to encourage prospective buyers to make the move from renter to owner and can make it easier for existing homeowners to move-up to a larger home. Recent changes in the mortgage marketplace have also created new opportunities for many buyers. For example, the half-point reduction in the annual mortgage insurance premiums for Federal Housing Administration (FHA) loans is estimated to help buyers save as much as $1,500 per year on a $300,000 loan. Not only are FHA loans less costly for new borrowers, but also both Fannie Mae and Freddie Mac introduced low down-payment conventional loans for buyers, allowing as little as three percent down.

While accumulating a down payment has always been a challenge for first-time buyers to overcome, a bigger obstacle for many would-be borrowers has been the tightened mortgage lending standards imposed after the housing crisis. What’s important to keep in mind, though, is that credit standards are continually changing. Over the past few years, lending standards tightened as a result of the Consumer Financial Protection Bureau’s various loan requirements and other regulatory changes. However, we expect to see some loosening on the restrictions in the coming year, which should bode well for the housing market. Already this year, there are indications that mortgage credit is becoming more readily available.

Inventory and affordability each impact the market

In addition to qualifying for home loans, consumers need to be able to find the houses they want (and can afford) to buy to make the housing market more robust. Inventory issues impacted housing markets, particularly in the Mid-Atlantic, in late 2013 when there was a lack of available homes but high demand. In the markets where Long & Foster operates, we’ll likely see an increase of anywhere from 10 to 15 percent in inventory as prices appreciate and more sellers consider their options. Home values are anticipated to appreciate as well, but that appreciation more than likely will occur at a slower pace than previous years. The positive aspect of this is that more buyers will find affordable home prices and they will have more time to identify the home they want when the market is less frenzied.

First-time, move-up buyers likely to play a role in the real estate market

First-time buyers, who are mostly Millennials, could play a bigger role in the housing market in 2015, particularly with credit standards loosening. A recent report from The Demand Institute showed that 75 percent of Millennials believe homeownership is an important long-term goal and more than 8 in 10 already own a home or plan to own their own home someday. This group should be a key demographic in the years ahead.

Move-up buyers are also important to a healthy real estate market. Though there is some speculation that some of these potential buyers will remain in their current homes because of the “lock-down effect” of their low interest mortgages, this market segment is still likely to move because of career changes or family changes that require relocation.

In the luxury home market, there’s been a shift over the past year as suburban luxury home sales have slowed while high-end urban retreats are selling quickly at higher prices. That trend is expected to continue as part of a cultural shift toward more walkable lifestyles.

Challenges to come in 2015

While the forecast for 2015 is positive, there’s no question there may be a few challenges that could affect the housing market. Increasing volatility in the stock and bond markets, global geopolitical tensions, the possibility of another government shutdown in October when the current budget deal expires and the potential of increasing interest rates could all have a short-term impact on real estate. However, a temporary slowdown in the sales pace or even sluggish price appreciation could be an opportunity for first-time buyers and investors to achieve long-term gain.

If you’ve made the decision to buy, sell or move up to your next home, Long & Foster Real Estate offers multiple divisions that can help you find, finance and insure your home. Representatives of Prosperity Home Mortgage are available in most Long & Foster offices in the Mid-Atlantic and Northeast region to assist prospective buyers with financing. A professional Realtor can work with first-time buyers and more experienced buyers, including investors, for a smooth transition. In addition, Long & Foster agents have a range of contractors they can recommend to provide service to buyers and sellers before and after they buy a home.

About the author

Jeffrey S. Detwiler is president and chief operating officer of The Long & Foster Companies, parent company to Long & Foster Real Estate, the largest independent real estate company in the United States, and Prosperity Home Mortgage, LLC, a full-service mortgage banker. From extensive, neighborhood-level market information to Long & Foster’s core services companies, providing mortgage, settlement, insurance and property management services in a streamlined manner, Long & Foster offers the services necessary to make today’s real estate transactions manageable for owners and investors.

*The information contained in this article is not intended to be and does not constitute financial or investment advice.