So far 2015 is looking a lot like 2014 in terms of closings. Both single family homes and condominiums are very close to 2014 levels between January and May. However, the type of buyer has been shifting with prices ratcheting higher during the past year. Investors now make up a relevant but declining share of closings and the higher prices have likely tempered some first-time buyer interest although low interest rates have been supportive of this segment. With the recent volatility in mortgage rates and the Federal Reserve jawboning about a possible interest rate hike in 2015, the low rate headwind many buyers have come to expect may not last forever. Some of the more marginal buyers may be headed for a disadvantage. Although not all Fed observers believe they will increase rates, the recent national jobs data seems to favor the idea of a rate increase, if even a moderate one. Still, the picture remains murky with a Fed board that is not aggressive.
After a strong bump in prices between March and April, pricing pressure took a breath and essentially traded sideways. We prefer a more settled market with gradual shifts in pricing at levels that reflect the underlying fundamentals in the job market and household incomes. With job growth maintaining an upward trend, this instills some level of comfort that prices have not escalated beyond what the majority of buyers can afford.