According to the National Association of Realtors, median home prices are expected to rise only 6% next year compared to last year's 11%.
Home sales are predicted to hold steady in 2014, but due to a low supply of houses in the market, prices will continue to rise. This plateau-ing of home sales is the first reversal since 2011, when sales were on the rise.
Lawrence Yun, the trade group's chief economist at the NAR annual conference, explained that the lack of income growth, higher home prices, and rising interest rates will effect sales. As it is, the existing home inventory is now near a thirteen-year low.
"The inventory shortage will not go away," Yun says, though the new home construction is far from hitting rock bottom. Rising home prices may encourage others to sell homes, but the sellers will also most likely be buyers. This cycle will help to expand sales inventories.
Housing markets to keep an eye on include Salt Lake City, Houston, Denver, Seattle, Tampa, and Atlanta. These all prove to have stronger job markets and are attracting more home owners.
If lenders become more lenient with their loan standards, which they might if a dropoff in refinance demand occurs as Yun predicts it will (and with a 15-year low to boot), home sales may increase because of the expanding number of potential buyers. Yun explains that since interest rates are below 6%, and have been for five years, there are not many people with mortgages to refinance. NAR predicts that the typical 30-year fixed mortgage rate will reach 5.4% at the end of the next year. Interest rates are likely to rise as the Federal Reserve lays off the stimulus measures from 2008.
The Zillow site also states that 2013 home values will be 6.7% higher than last year and rise 4.3% the next, slowing the home price appreciation ahead. At that pace, the Zillow prediction follows that the first quarter of 2018 could be higher than the May 2007 peak.
With rising prices typically come more sellers. However, this housing market shows an irregularity from that trend, says John Krainer, economic researcher at the Federal Reserve Bank of San Francisco, because inventories have not then increased. Many homeowners, who may still owe more on their mortgages than their homes are worth, are likely waiting to be rescued by further appreciation in home prices, Krainer says.
Article Citation: Schmit, Julie. (November 10, 2013). Realtors forecast flat sales, rising prices. USA Today. Retrieved December 5, 2013 from: http://www.usatoday.com/story/money/business/2013/11/10/realtors-home-sales-outlook/3476517/.
Picture Citation: http://www.paradisehomesalesalabama.com/floor-plans.
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