Happy New Year to all! As the stabilization of the real estate market continued to improve over the year, it created extreme excitement about what 2014 may hold for the market, especially in our Tampa Bay area. In this blog, we will briefly discuss the most recent events that occurred in the housing market during the final months of 2013, as well as discuss what the real estate industry may see during the year of 2014.
Due to the short supply of inventory throughout the majority of 2013, the real estate industry witnessed some swift price increases resulting from the increased demand for homes. In response to increased demand, constructing spending reached the highest point the market had seen in the last five years. Sales, pending sales, median prices, and closings all saw significant increases. Shadow inventory levels, properties in foreclosure withheld from the active market, began to diminish as the recovery of the housing industry persisted. The Federal Housing Administration made strides to make homeownership possible for previously financially challenged individuals and families, who endured foreclosures and short sales, by reducing the waiting period from three years to one year, after achieving financial stability with verifiable income and repaired credit scores.
According to David Crowe, chief economist for National Association of Home Builders, “the cards are in play for a decent and fairly strong recovery in 2014 and particularly in 2015.” For all those involved in the real estate industry, we hope that Crowe’s statement proves to be true. So what changes can we expect to see in 2014? For starters, mortgage rates are expected to increase sometime this year. In fact, Zillow has predicted that mortgage rates will most likely reach 5% by the end of the year. Although this seems much more significant than a 3-4% rate like we have witnessed over the last few years, the increasing rates are simply returning to the normal levels from before the housing bubble.
With the rising rates comes one significant advantage; mortgages will be easier to get than in 2013. According to Erin Lantz, Zillow’s director of mortgages, “rising rates means lenders' refinance business will dwindle, forcing them to compete for buyers by potentially loosening their lending standards." Zillow also predicts that home prices will rise by 3% in 2014, which will allow for the increased availability of new and old homes for sale on the active market. Unfortunately, home prices and mortgage rates are increasing at a faster pace than the income levels for many Americans, which may ultimately affect the affordability of home purchases for some.
Just as we wrote about the diminishing shadow inventory levels in November, underwater mortgages and foreclosures are expected to continually decline moving into 2014. With the increase in home prices during 2013, and the predicted increase in 2014, many homeowners will regain positive equity and possibly move into more affordable locations across the nation.
With these projections, it appears as though the housing industry on course for recovery. 2014 should be a great year for the industry and everyone involved. All we can do now is wait to see if the predictions turn into reality and do what we do best, real estate.