Today I began seeing press releases from real estate pundits throwing out their predictions for the 2015 housing market. That’s all fine and good and I will probably give own opinions on 2015 in the coming weeks, but before I do that I thought it would be appropriate to take a look at what transpired in 2014.
2013 was a hot year for home prices across the nation and the prediction for 2014 was that prices would continue to rise but at a much slower 4% - 5% increase compared to the 10% plus of 2013. I saw that to hold true as the first quarter of 2014 was still strong, but as summer approached I noticed a few thing transpire that led to a slight downturn in sales prices into the second half of the year.
Confidence was high coming out of 2013 and because prices had rose significantly many homeowners were now finally not “underwater” any longer and could finally make that move they had been wanting to make. This led to an uptick in inventory available for sale as owners listed their homes for sale looking to “move up”, “move down”, or relocate. A recent Palm Beach Post article reported that the inventory of single family homes available for sale is 14% higher than at this same time last year. Demand from homebuyers remained just as strong with sales volume increasing by 19% and that’s a result of actually having inventory available. Home prices only grew by 2% during this same timeframe. In summer of 2012 I penned a blog article titled, “It'shere...Real Estate is back!”, and it was. Much of 2013’s huge price increase was fueled by stunningly low inventory and at this time prices were also about 10% lower on average than in 2014. In Northern Palm Beach County we saw many neighborhood values jump by 20% in 2013. Demand from 2013 to 2014 didn’t change dramatically, but now homebuyers had more choices to meet the demand. Also, with asking prices in our area 20% higher on average than the year before buyers became more deliberate and cautious in the home buying process through the 2nd half of 2014. This increased competition of homes for sale led some homeowners to begin dropping their asking prices, so not to miss their opportunity to move before the school year and much of the rest of the market followed. While prices didn’t increase dramatically in 2014 it was a very healthy and probably the most uneventful and “normal” year in the housing market we’ve had in almost a decade.
The early predictions on mortgage rates for 2014 were not too rosy. Many predicted rates to rise from the high 3% range of 2013 to over 5% by the end of 2014. Thankfully for the housing market those predictions were wrong and rates hovered between 4 – 4.5% most of the year. While mortgage interest rates favored better than their early predictions, lending qualifications and costs did not. FHA – backed loans, which are best known for their low-down payment requirement of 3.5% and easier qualification requirements, raised their funding fee and PMI (private mortgage insurance) costs on all loans earlier this year. Also, with FHA loans a borrower could be eligible to drop the PMI insurance after 5 years, but now PMI remains for the life of the loan. The other significant change I saw this year was with the lending guidelines for a borrower with a past short sale. The guideline for a conventional borrower putting 20% down was that 2 years after a short sale they could be eligible to get a mortgage again. That rule changed to 4 years now. I knew of many people with past short sales that were going to be in the market to buy a home end of this year or in 2015 who now may not be eligible to get a home mortgage until 2016.
Speaking of short sales, the prediction for 2014 was that there would be less short sales and “bank-owned” properties in the marketplace and that definitely seemed to hold true. In our market distressed sales fell to around 10% of our market from about 20 – 25% in previous years. The higher homes values helped many homeowners avoid short sale and foreclosure and the banks have been forced to do a better job at managing their distressed inventory and managing the foreclosure process.
2014 turned out pretty much as predicted overall in that it would be a return a more normal, moderate housing market.
Stay tuned for new posts on our outlook for the housing market in 2015.
Joby Slay is the owner of The Harvest Realty Group, a full-service real estate brokerage helping clients in Northern and Central Palm Beach County buy and sell properties in all price ranges. Joby specializes in short sale and foreclosure transactions and has quickly become recognized as one of the premier short sale experts in the area. Since 2004, Joby has successfully negotiated short sales in 4 South Florida counties (Palm Beach, Broward, Martin, and St. Lucie) from Ft. Lauderdale to Ft. Pierce and often sought out for his advice on short sale matters across the U.S. He understands the financial and emotional difficulties that often accompany families faced with foreclosure. Joby and his team successfully complete dozens of short sales a year and have saved dozens of individuals and families from losing their homes to foreclosure. Joby earned an MBA in Real Estate Development from Nova Southeastern University graduating in the top of his class with Sigma Beta Delta Honors and a 3.90 GPA. He also earned designations as a CDPE – Certified Distressed Property Expert, IMSD - Internet Marketing Specialist Designation, and PPMC - Professional Property Management Certification. He is a Florida Licensed Real Estate Salesperson and a Member of the National Association of Realtors and Local Board of Realtors.