What is Going to Happen to the Housing Market Next Year 2014
At just about every get together, and especially every holiday party this year, I get stopped and cornered for a question and answer session on what is going to happen to the housing market next year 2014. I expect these quizzes and really enjoy sharing various statistics, industry trends, and the actual current market conditions in Agoura Hills, Oak Park, Westlake Village and Thousand Oaks.
The discussion can be from the very surface to the deep numbers, depending on the audience.
Generally speaking, in my opinion, there are 3 major factors to pay attention to next year that will affect the housing market right on its face.
1. Interest Rates. The government bond buyback program (i.e. quantitative easing) has been ongoing for over two years and has had the expected result of keeping interest rates low and in check. The government has been purchasing approximately $85 billion in bonds a month to free up bank balance sheets and allow them to lend more more at lower rates, with the fed fund rate charged to banks remaining at zero. Various experts have predicted an interest rate increase through 2014 to around 5.5% as the government begins to taper this program.
2. Housing Demand. Everyone can see it. The demand for housing remains incredibily high as the 2013 year home price increases have brought out a significant number of under water homeowners back into some equity and they are making a move. However, in certain areas, inventory still remains low as people are in a bit of a wait and see approach to how 2014 is going to turn out. Especially with the Federal government issues and Obamacare.
3. Interest Only Loans. There were a large amount of interest only, high loan to value loans that were placed between 2004 and 2007. The loan terms were typically 5, 7 or 10 years in length. We have seen the stress in the past of the 5 year interest only loans coming due but have yet to see the 7 and 10 year interest only loans that will be expiring between now through 2016. These loan programs will likely not be available in the same design they were in the past and will bring about a potential inventory of homes for sale in order to get out of that situation.
The above is the framework for most of my holiday discussions this year. We are very excited about what 2014 holds in store and expect a vibrant housing market regardless of interest rate increases.
What is very interesting is that the various factors affecting the housing market right now begin to equalize themselves and create sustainable market conditions.
HAPPY HOLIDAYS!!!
What is Going to Happen to the Housing Market Next Year 2014
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