2015 spring market outlook is rosy

The mortgage industry recently made a change to their minimum down payment for conventional loans from 5 percent to 3 percent. This would allow a borrower with good credit to buy a $200,000 home with a down payment of $6,000 instead of $10,000. Currently FHA offers a minimum down payment of 3.5 percent, but their closing costs and monthly mortgage insurance is a lot higher than what they would be for a conventional loan with 3 percent down. FHA allows for lower credit scores where conventional loans usually do not.

What the industry has discovered is that borrowers with good credit scores, 700 and above, are not having trouble paying their bills, they are having trouble saving enough for a down payment. This program would help bridge the gap in allowing more people to qualify for mortgages which will in turn help to sell more homes.

Another potential boost to the housing/mortgage market is the year-end decrease of gas/oil prices. Goldman Sacks estimated that the price reduction in gas/oil is the equivalent of a $75 billon dollar tax cut. The reduction in gas/oil prices could finally be the spark that gets our economy really moving. The money that consumers are saving will be spent on other items that should boost economic output. In other good news, are seeing very little wage inflation, which has been historically tied to the appreciation rate for residential real estate.

On the flip side of the coin, the above trends will tend to increase mortgage rates over time. We are anticipating gradual increases throughout 2015, but that will be closely tied to how the overall economy performs.

The Fed is looking to raise short-term rates in mid 2015, so that will also be something to keep a close eye on. The Fed has not increased rates for 8-plus years, so this new era that we are going into will probably bring in some volatility.