What will 2014 hold for our real estate market? Well, of course we don’t have a crystal ball, but the closest thing may be a report that was just released by the National Association of Realtors. Chief economist Lawrence Yun, often seen as a rosy proponent of the real estate market for obvious reasons, instead preached balance and cautious optimism in his report.
The main points of the housing forecast?
- Yun predicted that sales will remain flat at around 5.1 million units sold.
- Overall, prices will appreciate by about 6%.
- Interest rates, now hovering at the 4.16% mark, will jump to 5.4% as the Fed eases back on governmental controls and investments to spurn the mortgage market.
The NAR, and Yun, said they formulated their 2014 outlook based on a variety of housing, job, economic, and interest rate factors. The market is definitely much healthier than a year ago, but over the next 365 days +, rising interest rates will slow sales and investors will take a step back from the market as REOs and distressed property inventory has shriveled, but job growth and consumer confidence are on the rise as bank’s ease their tight lending standards. The Federal government is expected to taper off its $85 billion a month bond purchase program, which is stimulating the economy and keeping rates low.
Yun predicts that even as existing home sales remain flat, new home sales will increase by 18.5%, to strong 510,000 unit levels, a rise from 2013’s 430,000. Smaller builders, forced out of the market as demand dried up, will reenter the construction industry, helping that job sector’s growth and bringing new home starts up 25% from the 2013 rate, 600,000 units. That is still low compared to historical averages around 1.5 million new starts per year, but still a step in the right direction.
Industry experts like Zillow forecast 4.3% appreciation in 2014, down from this year’s 6.7%, but still that is seen as a healthy slowdown and balancing act while rates rise. Considering that since 2011, existing home prices increased by 18%, the mood at the recent NAR convention was positive but restrained. With wild swings of unprecedented appreciation from 2003 on and then the market going through a historic decimation and price drop, healthy, balanced appreciation and stable increases in growth are being seen as a breath of fresh air, not at all a setback.
We’ll keep an eye on how accurate Yun’s crystal ball turns out to be, but most experts applaud those numbers – and the mindset of cautious optimism.
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