Michele Chiu: climbing interest rates and the 2015 market
A real estate outlook for 2015
Michele Chiu is a Realtor and consultant at The Boutique Real Estate Group.
Are you optimistic about 2015?
Absolutely. We’ve come a long way since just three years ago in 2011, when home values were slowly rising again, and interest rates for a 30-year fixed-rate mortgage were just starting to dip below 5 percent. Now, buyers are still enjoying low interest rates, and the sellers who bought their homes after 2006 are finally starting to see a buildup of equity in their homes. This positive trend is projected to grow toward 2015 and 2016.
CAR recently came out with the 2015 California Housing Market Forecast, showing that unemployment rates have been steadily decreasing from 7.4 percent last year to about 6.2 percent this year. Next year’s projection for unemployment is predicted to be near 5.8 percent. With falling unemployment rates, we’ll also see a rise in real disposable income: A change of about 2.6 percent more in 2014 than 2013, which should continue to rise through 2015. This means more savings and purchasing power for those who have been saving and planning to purchase a home in 2015.
The housing market?
Here’s the deal: People who bought in 2013 wished they purchased in 2012, and people bought in 2014 wished they purchased in 2013. So what will the buyers for 2015 tell their 2014 selves? Buy now! Why? Four really good reasons: Prices will continue to rise; interest rates are projected to increase; either way you are already paying a mortgage or rent; and if not now, then when? On the other hand, sellers are also enjoying a positive trend in home values and, if priced correctly, will typically sell in three months or less. Overall, we should see the real estate market stabilizing in 2015, with growing home values and higher interest rates.
No matter what year it is, I’m always optimistic about my success. To me, success is not only about the growth in my sales, but also the growth in the relationships I nurture and maintain with my clients, and the business lessons I learn throughout the year. This coming year will mark my third year in real estate, as well as the third year I’m truly happy with my career!
What are you worried about?
I’m worried for my buyers who may be priced out of their price range if they don’t take advantage of the current home values and low interest rates. I saw this happen to a handful of my buyers from 2013 onto 2014, where they wanted a number of bedrooms at a certain budget, but due to the rise in interest rates and home values, they could no longer afford the home they wanted and had to extend their lease for yet another year. I predict the same may happen to the current buyers who decide to stay on the fence about their home purchase as values and interest rates will continue to rise.
How much do you fret about global events?
Quite honestly, I don’t have time to fret too much about global events. However, I will add that the recent change in government in China has lead many Chinese investors to move their assets from China to America, effectively driving up all cash sales and home values.
Will mortgage rates go up or down next year?
Up, up, up!
Will home prices appreciate next year?
Will agents be more productive next year? Why or why not?
Since the market is stabilizing, I believe active agents will continue to be productive, while agents who work part-time may see a drop in their sales compared to this year. We saw this happen with production volume in 2013 to 2014 as home values and interest rates continue to rise.
Will the portals play a bigger role in real estate next year?
Today’s buyer will most likely do research on the community and home they are thinking about purchasing prior to contacting an agent. This means they are less and less dependent on their portals for information. The only upper hand we have as agents is being even more knowledgeable about the communities where we work to help our clients differentiate between the facts and myths they read online.
What will be the biggest source of real estate leads next year?
Client referrals and online marketing, like ZTR, our brokerage-based website and in-house seller capture sites.
Are you making plans to expand, contract or maintain your business this year?
Being part of The Boutique Real Estate Group always challenges us to think differently and discover different ways to stand out amongst the hundreds of other agents in our community. Personally, I’m planning to team up and collaborate on more marketing strategies with other professionals in the industry. It’s always a good thing to grow your network!
What is the biggest challenge for the industry in the coming year?
The challenge next year will be removing the idea anchor of previously lower interest rates for many current buyers. Since many buyers this year will trickle onto next year, buyers may have the feeling that they “missed the boat.” But in reality, interest rates will only continue to grow. As for sellers, many homes currently on the market have started to face a bit of competition this year with all of the new developments in Orange County. Although hundreds of new homes will be hitting the market in 2015, nothing beats a low HOA and no Mello-Roos!