My Real Estate Predictions for 2014
After consulting Nostradamus, looking into my crystal ball, throwing bones, reading entrails, and doing some serious research I have come up with a list of predictions for the 2014 real estate market.
As a courtesy to you the reader, I will not only predict but will back-up my predictions with explanations. Not every fortune teller would be as considerate.
Some of these predications will be specific, most will be generalizations, but all will be about real estate, mortgages, and homes.
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Home Prices
My caveat to prices is this; after the crash of 2006-07 home prices dropped by approximately a third. Our first sign of recovery came in 2012 where we began to see a significant increase in price because homeowners were able to qualify for mortgages again. 2012-2013 saw an increase of approximately 23% from crash prices, still keeping us below pre-crash prices. My opinion is the market had a hard 3% correction, which has now been rectified.
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Prediction:
After a year skyrocketing price gains, the market is almost back to where it was prior to the crash of 06-07. Prices will come back into equilibrium in 2014 and we should see an overall normalization, meaning price are back to where they were prior to the "correction,” and then see a 3-5% increase in prices.
Why:
Prices have gone up, beginning September of 2012, because buyers are able to get mortgages again. It is a simple example of supply and demand coming into balance now that the distressed property phase is cycling out investors and speculators are priced out of this market. Homeowners who were underwater are no longer in jeopardy of having to sell their home for less than is owed and the elusive shadow market is just that.
The NATIONAL ASSOCIATION OF REALTORS® predicts that by the time this year ends, prices of existing homes will have risen 6 percent. Next year, prices are expected to rise an additional 5 percent or so and then another 5 percent in 2014.We have had a 23% overall increase in price since the crash in 2006—there was a significant (15%) increase in price beginning 2012 and continuing through 2013, so while houses do cost more now than they did last year the huge price increases have stopped and things cost about what they should cost.
Inventory
Prediction:
Inventory will come into balance, meaning sellers and buyers will come into equilibrium for existing homes and begin to expand with new homes being built in order to satisfy buyer demand. By 2014, home sales are expected to grow by about 14 percent. That’s significant.
Why:
A huge boost in consumer confidence is driving demand and is increasing as many believe that housing finally “hit bottom” this year and is on its way up. Inexpensive money, mortgages, and a freer lending environment is making it possible for consumers to believe they can purchase homes again and super consumers to want to move up.
In addition the boomers are downsizing. This creates a market for existing higher end single family homes in coveted markets, and drives demand in walkable neighborhoods with smaller homes and duplexes being particularly in demand.
Mortgages
Prediction:
The ultra-low rates will stick around forever. The NATIONAL ASSOCIATION OF REALTORS® is forecasting 30 year rates to climb to 4.6 percent, within a couple of years. So that’s one prediction that’s not so great.
Why:
The housing recovery foundation has been built on the Federal Reserve Bank’s keeping the lending rate at almost nil and their program of buying government bonds and mortgage backed securities in an effort to spur consumer and lender confidence and normalize the real estate market. It will not last forever and as confidence in the economy and real estate returns there will be a tapering by the Fed to prevent inflation.
Distressed Property
Prediction:
The distressed property market will continue to dwindle meaning all those “great” deals available over the past few years will dry up in all but the most depressed areas.
Why:
Housing prices are up and fewer properties are worth less than is owed on them. Government intervention, many programs and consumer outrage are making it more difficult for lenders to arbitrarily foreclose on homeowners in trouble so the distressed properties are in decline. The NAR projects that distressed sales will fall to about 25 percent of the market-share of sales this year. And by 2014, they’re expected to fall to about 8 percent.
If you have any questions or comments please contact me on my website via www.americasells.com.