What’s in store for 2014? More of the same…only different. This could be the executive summary for what to expect of housing in 2014. However, since most folks appreciate a few more details in a forecast, let’s be specific.
Consumer Demand: The Conference Board, a nonprofit association of businesses, found that the percentage of consumers who intend to buy a home in the next six months was the highest since 2000. Adding to the push is pent-up demand among young people who, hampered by lack of jobs or insufficient income have been living in their parent’s basements or sharing apartments with roommates. Moody’s Analytics expects the economy to expand enough in the coming year to enable young people to begin moving out in order to establish new households as home buyers.
Price Appreciation: In 2013, a sense of urgency drove traditional buyers hoping to take advantage of still-affordable home prices and historically low mortgage rates. Buyers found selection limited and were often forced into bidding wars with investors and other buyers who paid cash. Sellers reaped the rewards in terms of quick sales, often above the asking price. Almost half of the cities tracked by Clear Capital, a provider of real estate data and analysis, experienced double digit increases in home prices. The Puget Sound Region ranked high on the list with 16.3% year-over-year price appreciation last year.
In 2014, the breakneck pace of home price growth from earlier in 2013 will begin to slow – and that’s not necessarily bad news for the housing market where affordability remains a concern for many buyers. Clear Capital forecasts that home prices nationally will rise by 3% to 5% in 2014, about the historical average. Kiplinger expects an increase of 4% while Zillow predicts a 4.3% gain. Markets with stronger job growth will experience higher rates of appreciation . That includes Seattle where a 6% price gain appears to be a reasonable forecast for what is expected by Zillow to be a “top ten” housing market next year thanks to our stable economy.
Housing Inventory: As home prices continue to rise, more owners who had been underwater on their mortgage will emerge from the sidelines to start selling and buying homes. This will feed both the first-time buyer market searching for acceptable inventory to purchase and the move-up buyer previously unable to upgrade to the next price point.
Investors have slowed their purchase of available homes as distressed sale bargains have dried up. This in turn will create more selection for occupant buyers. Supply will come closer to meeting demand.
Mortgage Rates: Consumers have enjoyed an extended period of rock bottom mortgage rates. While interest rates will continue their climb which began in mid-2013, we are still below the 6 % rates which prevailed prior to the financial meltdown and the 7% rates which were the norm of the 1990s.
By the end of 2014, the National Association of Realtors forecasts the average 30 year fixed rate will hit 5.4%. Fannie Mae is pegging that number at 5.7%. In any event, rates will rise as the Federal Reserve pulls back on the stimulus measures it has employed since 2008 to hold rates down.
Lending Guidelines: Following the mortgage market implosion of 2007, federal legislators began crafting revised lending guidelines which would define safe and sane home loans. The resulting Qualified Mortgage (QM) rule will be implemented in January of 2014.
The new guidelines focused on the consumer’s ability to repay a loan will eliminate potentially risky mortgage products, tighten automated underwriting approval systems, and require more extensive documentation to verify income, assets, and liabilities.
2014 can reasonably be expected to be the best year for housing since we entered the recovery stage two years ago. The positive momentum continues to build. More of the same…only different.
As we move into another busy year of buying and selling real estate, I hope you will remember me as your local expert. Please do not hesitate to contact me if you have any questions or require assistance with regard to your personal situation.
Warm regards,
Patti Chalker
John L Scott