Editor’s note: The real estate industry is heading for big change in 2005. Experts once again are predicting slower home sales and easing price appreciation due to an anticipated rise in interest rates. In this Inman News forecast series, we attempt to get a clear picture of the industry next year, including what we can expect from housing numbers, who the industry should be watching and what the best and worst-case scenarios might be for housing in 2005. (See Part 1: The interest rate roller coaster ride; Part 2: Best-case scenario for housing next year; Part 3: Worst-case scenario for housing next year; Part 4: What will happen in 2005? and Part 5: 15 people to watch in 2005.)
Inman News asked readers to give us their own market forecasts for 2005. Here’s a sampling of what they had to say.
Jim Cortese
Division president
Stewart Title of California
Santa Clara Co., Calif.
“I think it’ll be a pretty good year. I don’t expect anything drastic one way or the other. I think it will be pretty steady. But what the country’s doing in terms of war, terrorism, globally speaking, that’s the unknown. There was a time when in California we’d just worry about earthquakes and Mother Nature. And now we have this relatively new factor. If things stay relatively normal in terms of the situation our country’s in, I think it’ll be a pretty good year.
“Rates may inch up a little bit over the course of the year, maybe 1 percentage point. The economy is bouncing back. We may lose in the refinance business, but the purchase market will stay fairly strong.”
Pava Layrer
President
Heritage National Mortgage Corp.
Grandville, Mich.
“For most of this year, we’ve been in more of a seller’s market. I think that’s going to carry over into next year. I’m seeing more and more young first-time home buyers coming in – 18-, 19-, 20-year-olds.
“Interest rates? Obviously that’s the million-dollar question. I think we’re going to touch near the sevens, and they will float back and forth a little bit. I don’t see how they can’t go up. If the economy starts to do an upswing, they’re going to go up a little higher. They’ll probably stay in the upper sixes. I could be dead wrong, but it’s just a sense of where rates are going to go. But if something happens to Greenspan, all bets are off. Next year, I think my industry is going to have to work more efficiently and more old-fashioned for the business. It’s not going to be easy money.”
Nick Athan
Sales Manager
Leader Mortgage Co.
Lenexa, Kan.
“The industry will prosper once again in 2005. We have had a strong fourth quarter and with the presidential elections behind us rates are very good. The fever for individuals to buy homes will never dissipate.
“The trend to consolidate debt should be even higher next year as interest rates remain strong for consumers who wish to pay down or pay off revolving debt. With that said, I do not think we’ll see a major increase in rates and in fact I would not be surprised if rates improve over the first quarter of 2005. They’ll probably rise like they did in the second and third quarters of 2004 but still rates are as strong as they’ve been despite the fact this country has issues abroad and with oil prices reaching record highs it appears that that has not swayed people from purchasing homes.”
Bruce Norman
President
First Mortgage Corp.
Diamond Bar, Calif.
“I always joke with people that it will get better, it will do worse or it will stay the same. You can go broke trying to figure it out. When you’re talking about housing, you’re talking about interest rates.
We’re probably going to get a couple, three or four more increases from the Federal Reserve, with the 30-year fixed increasing by half a percent to three-quarters of a percent. But I would never bet money on that. If rates do go up a half percent, three-quarters of a percent, it’s almost certain there won’t be the kind of volume we’ve had the past year or two.”
John Anthony
Owner
ACA Mortgage
President of Pennsylvania Association of Mortgage Brokers
Mechanicsburg, Pa.
“Next year should be an exciting year for all of us in the industry. We’ve just experienced probably the lowest rates in 40 years and they’re probably not going to stay there in 2005. My opinion is it’s going to be a great year, but we’re going to see some challenges – from an industry standpoint, adjusting to a lower volume and learning how to utilize technology to make up for that.”
Mark Smith
CEO
Baton Online Processing
Carmichael, Calif.
“Mortgages generally, and specifically mortgage processing, will become increasingly paperless as brokers/lenders look at ways to lower overhead costs and provide access to loan data for geographically dispersed organizations.
“Outsourced processing in general will increase as more and more brokers look for ways to control fixed costs, thereby reducing their break-even point.
“Those managing brokers who have gritted their teeth and rationalized their mortgage brokerage by cutting to genuinely sustainable staffing levels will face three realities that boil down to one strange fact – their business will be, in a very real sense, starting over.”
Everett Ives
Consultant to mortgage brokers
Texas
“2005 will be a turnaround year. Many lenders have had difficulties due to volume drop off after August 2003. The first quarter of 2005 will be the beginning of the climb out of the slump, in part due to the threat of rising interest rates and the current slump in housing prices in Texas. Volume will climb through the year and housing prices will begin to increase. There will likely be a ‘mega-merger’ in the mortgage industry before April 2005.
“RESPA reform will be back on the table but likely only the packaging part of the rule and the industry will be divided into three parts, the super jumbo mortgage companies that want packaging, the mid-sized companies that don’t care and don’t understand the fuss and the small mortgage companies that see packaging as a way to control the market and threaten the existence of the little guy.”
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