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6 Housing trends to watch for in 2014: is this the year of recovery?
By Tara Steele, Agent Genius
Housing trends in 2013 vs. 2014
As the curtains close on 2013, the industry is squarely focused on the coming years, hoping for a full economic recovery, but is 2014 the year of the housing recovery, given the many years this sector has been beaten down and struggled to regain much lost ground?
“In 2012 we saw the housing market recover and, going into 2013, we expected continuing recovery,” said Lawrence Yun, chief economist of the National Association of Realtors (NAR). “Instead, the recovery accelerated a lot faster than we anticipated, which was great for sellers and for the 75 million homeowners who saw their home values appreciate.”
Part of NAR’s exceeded expectations is in their caution in having optimism, particularly with their chief economist having the authority to be a true economist rather than a cheerleader, which the trade group was accused of with Yun’s predecessor.
But is any of this good enough reason to hold out hope for 2014 being the great year of recovery? Let’s look at the 7 housing trends realtor.com has outlined as a recap for 2013, and we will forecast how each factor will change in 2014, and whether or not we’re in for a big recovery.
1. Housing prices rose quickly
According to realtor.com research, the national median listing price was $179,900 in January 2012 and rose to $180,000 by December 2012, and the pace of price appreciation accelerated quickly over the year to reach a median list price of $199,500 by September 2013.
In 2014, economists agree that home prices will continue to rise, which homeowners that are still underwater desperately need, but no extreme surge is expected, so watch for a healthy pace of improvement to continue in the coming year.
2. Mortgage rates remained low
“We expected mortgage rates to rise in 2013, and they started to increase in the late spring, but they’re still very affordable when you look at rates on a historical basis,” Yun said. “They just aren’t at the super-low point we saw earlier.” According to Freddie Mac, 30-year fixed-rate loans were as low as 3.45 percent in December 2012 and rose to 4.49 in September 2013.
In 2014, some believe rates could dip, some believe they will jump, but the truth is that no one knows, because there are so many moving pieces that could shift the ultimate outcome, but based on 2013, we predict that they will remain low but will, in fact, increase slightly.
3. Bidding wars
The combination of rising prices, low mortgage rates and low inventory led to a sense of urgency among buyers and the return of bidding wars, said Don Frommeyer, president of the National Association of Mortgage Brokers. According to realtor.com research, inventory in 2012 reached a high of 2,083,710 homes on the market, then steadily declined to a low of 1,583,497 homes in February 2013. At the end of September 2013, 2,210,000 homes were for sale, approximately a five-month supply.
In 2014, bidding wars will become the norm in many cities, but not nationally. Smaller cities or areas with lower demand will not necessarily see bidding wars, particularly in the areas most hard hit by the housing crash. Consider this a San Francisco issue, not a Pierre, South Dakota issue.
4. Housing affordability
In one statement, Dr. Yun said, “Housing affordability has come down a little this year because of double-digit home value appreciation and the fact that income isn’t rising in comparable amounts. Rising mortgage rates, even though they’re still low, also have an impact. While affordability right now is at a five-year low, it’s still the fifth highest for the past 30 years.”
Later, he noted that a decline was expected. “Affordability has fallen to a five-year low as home price increases easily outpaced income growth,” he said. “Expected rising mortgage interest rates will further lower affordability in upcoming months. Next month we may see some delays associated with the government shutdown.”
In 2014, we predict that housing affordability will decrease, in fact, it will diminish in specific areas like San Jose or Stamford. Overall, housing will remain affordable, and may even inspire sales, but this metric will be inconsistent across the nation.
5. Cash buyers
Dr. Yun said a continuing surprise is that about one-third of all home purchases were made with cash, a market share that has been consistent for the past three years. While some of these cash buyers are from overseas and some are institutional investors, others are “mom and pop” investors who have had trouble getting financing.
“Even some owner-occupant buyers are cash buyers because of the excessively tight underwriting standards for loans,” Yun said. “Some people are getting help from relatives to buy, and then they plan to take out a home equity loan later to repay them.”
In 2014, cash buyers will remain around one in three, and not just for investment reasons, but because, as Dr. Yun mentioned, lending remains tight. Underwriting may loosen up a bit in 2014, but as an overreaction to the housing crash, it won’t be enough to get buyer behavior to a pre-recession norm this year.
7. Rents on the rise
“Right now we’re seeing replenishment of renters who want to buy homes,” Barry Habib, co-owner and chief market strategist for Residential Finance Corp., said. “At the peak in 2002, nearly 70 percent of people owned homes and 30 percent were renters; now 65 percent of people are homeowners and 35 percent rent. Not only are rents rising faster than home prices in many markets, but there’s pent-up demand from people who don’t want to live at home with their parents and who want to buy a home.”
In 2014, all economists agree that rents will increase, anywhere from 3.0 to 5.0 percent nationally as vacancy rates remain at their best levels in years. It will continue to be a landlord’s market.
So will 2014 be the year of recovery?
On all accounts, housing will continue improving, on that we all agree, but expect to see a steady pace of improvement in the coming year, not a spike – consider it more of the same. Home prices, sales, rents, and mortgage rates will all continue increasing steadily, and while 2014 will not mark a complete recovery to pre-recession norms, this future year does hold a healthy pace of improvement in store.
Give us a call, text or email if you have real estate related questions, we'ed love to help!
?-Steve and Sandra
Steve Hill and Sandra Brenner
Windermere Real Estate/FN
Seattle-Northwest
122502 Greenwood Ave N
Seattle WA 98133
call/text: 206-769-9577
email: stevehill@windermere.com
Check out these useful Home Search Apps:
Windermere for iPad
Windermere for Android
Check out these useful links:
BrennerHill.com
Best In Client Satisfaction
Seattle Real Estate Statistics
Windermere Housing Trends Newsletter
Our Preferred Lenders
George Runnels
Washington First Mortgage
WaFirstMortgage.com
call/text: 206-604-4545
Jackie Murphy
Cobalt Mortgage
CobaltMortgage.com
call/text: 425-260-6834
The top 10 hottest housing markets for next year
For the upcoming year, Zillow has predicted that ten markets will soar above all the rest, and we are surprised and pleased to see that not all ten happen to be on the coasts, unlike other lists we’ve already seen generated for 2014.
In addition to outlining the 2014 housing market predictions, Zillow predicts home values will rise by 3.0 percent, mortgages will be easier to get, and rates will reach 5.0 percent before the end of the year. Additionally, they are predicting that homeownership rates will fall to their lowest point in nearly two decades.
Zillow predicts the following ten housing markets are likely to experience the heaviest demand for homes alongside increasing home values:
- 10. Boston, MA
- 9. Portland, OR
- 8. San Diego, CA
- 7. Jacksonville, FL
- 6. Raleigh, NC
- 5. Miami, FL
- 4. San Jose, CA
- 3. Austin, TX
- 2. Seattle, WA
- 1. Salt Lake City, UT
Home values will rise nationally
Dr. Stan Humphries, Zillow chief economist notes that “In 2013, home values rose rapidly – about 5 percent nationwide and more than 20 percent in some local markets. These gains, while beneficial in many ways, were also unsustainable and well above historic norms for healthy, balanced markets.
Homeownership levels will fall
Despite values rising, Dr. Humphries notes that homeownership will likely hit 20 year lows in 2014. “The housing bubble was fueled by easy lending standards and irrational expectations of home value appreciation, but it put a historically high number of American households – seven out of ten – in a home, if only temporarily.”
“That homeownership level proved unsustainable and during the housing recession and recovery the homeownership rate has floated back down to a more normal level, and we expect it to break 65% for the first time since the mid-1990s,” Dr. Humphries concluded.
Curious about the value of your home? Give us a call for a no-hassle, no-obligation market analysis of your home!
-Steve and Sandra
Steve Hill and Sandra Brenner
Windermere Real Estate/FN
Seattle-Northwest
122502 Greenwood Ave N
Seattle WA 98133
call/text: 206-769-9577
email: stevehill@windermere.com
Check out these useful Home Search Apps:
Windermere for iPad
Windermere for Android
Check out these useful links:
BrennerHill.com
Best In Client Satisfaction
Seattle Real Estate Statistics
Windermere Housing Trends Newsletter
Our Preferred Lenders
George Runnels
Washington First Mortgage
WaFirstMortgage.com
call/text: 206-604-4545
Jackie Murphy
Cobalt Mortgage
CobaltMortgage.com
call/text: 425-260-6834
Housing Forcaset
The infographic below shows Fannie Mae's housing forecast as of August 2013. Home sales, prices and mortgage rates are all expected to rise.
When do you think it will be a good time to buy?
If you are considering a first time or move up home purchase, give us a call, we are eager to expalin to you the benefits of homeownership.
Steve Hill and Sandra Brenner
Best In Client Satisfation
Windermere Real Estate
BrennerHill.com
206-769-9577
Consumers’ pent-up demand promises economic boost
Economy, Housing and Real Estate
Paul Davidson, USA TODAY
American consumers have denied themselves so much for so long — putting off buying homes, cars and other purchases — that their pent-up demand is poised to kick-start a sluggish economy.
Four years into the recovery, stronger job growth, some loosening in bank lending and more stable household finances are finally paving the way for many Americans to move into their own homes, fill them with furniture and trade in creaky 10-year-old cars.
Last week, a measure of consumer sentiment showed buying attitudes toward appliances and other durable goods at the highest level since mid-2007. And the government reported that April retail sales solidly beat estimates despite huge federal spending cuts — a development that UBS economist Maury Harris partly attributed to an unleashing of pent-up demand.
Harris estimates that over the next five years, Americans' catch-up consumption will boost annual consumer spending growth by a percentage point and increase economic growth by half a point to more than 3% from about 2%.
"People have put things off," says IHS economist Chris Christopher. Now, he says, they're "feeling a little better."
After sharing a cramped one-bedroom Manhattan apartment the past five years, Justine and Matt Schwartz recently decided to move to a three-bedroom house in Greenwich, Conn. It will cost them hundreds of dollars a month in additional rent, as well as a new car lease and new furniture. Both Justine, a website editor, and Matt, a consultant, were promoted early this year.
After getting a raise, "I realized I don't have much to show" for it, Justine, 28, says. "We're feeling financially secure."
In the aftermath of the housing crash and recession, annual household formation was halved to 500,000 in 2008 and 2009 as Americans moved in with relatives and friends. Young adults aged 18 to 34 accounted for most of the drop, many of whom were unemployed, according to the Cleveland Federal Reserve Bank.
As a result, there were 2.3 million fewer households last year than there should have been based on population growth, Harris estimates. He expects those deferred households to sprout over the next five years — based on the recovery from the early 1980s recession — increasing household formation by 465,000 annually.
Housing starts, in turn, are expected to rise from 780,000 in 2012 to 990,000 this year and 1.2 million in 2014, Standard & Poor's predicts.
Other types of pent-up demand that should bust out:
Vehicle sales: The average age of cars and light trucks on the road is 11.2 years, up from 9.6 years in 2003, according to research firm Polk. Each new household leads to an average 1.3 new car purchases, UBS estimates. In the first quarter, 15.3 million new vehicles were sold at a seasonally adjusted annual rate, up from 9.4 million in early 2009.
Marriages: From 2005 to 2011, the marriage rate fell from 7.7 to 6.7 per 1,000 Americans, according to the Census Bureau. The rate should rise as young people move out on their own, juicing household spending, Harris says.
Births: Annual births fell by 7% to 4 million from 2007 to 2010. A family spends $226,920 on a child from birth through age 17, the Agriculture Department estimates.
Steve Hill and Sandra Brenner
Windermere Real Estate Seattle Northwest
206-769-9577
How Housing Is Leading Us Out of the Great Recession
We are often asked if the housing market can truly rebound if the all-round economy remains sluggish. We answer by explaining the housing market is not dependent on the economy but rather the economy is reliant on the housing market. Mark Zandi, Chief Economist at Moodys.com,addressed this issue in a recent report.
“Historically, housing has always led the U.S. out of recessions. It is the most interest rate-sensitive part of the economy, and as rates fall during recessions, housing rises first.”
How does real estate impact the economy?
Real estate impacts the economy in several ways. As Zandi explains:
“Housing’s resurrection is crucial to the creation of more jobs. Every new single-family home creates and sustains almost five jobs for about a year. These include not only construction jobs, but manufacturing positions for producing lumber, paint, nails, plumbing fixtures, carpets, wall board and so on. Truckers are hired to move this material around, and retailers add workers as new homeowners shop at home-improvement and hardware stores. Realtors, mortgage bankers, landscapers and cable installers all increase staff.”
Is the current market momentum sustainable?
If the economy is dependent on a recovering housing market, we need to know whether the current good news being reported in the real estate industry will continue as we move forward. Again, Mr. Zandi:
“The pace of construction has risen to 900,000 homes per year and is set to double to 1.8 million in the next few years. Even this will be only enough to meet demand; in an average year, 1.25 million households are formed, 350,000 houses are irreparably damaged or demolished, and an additional 200,000 are built for use as vacation or second homes. Given pent-up household formation—hundreds of thousands have put off their plans because of the tough job market—there could be a couple of years in which closer to 2 million homes will need to be built to meet demand.”
Housing will remain strong for the next several years. That will enable the economy to continue to heal until it fully recovers.
Have more questions about the Seattle Real Estate market?
Give us a call or email, we'd love to talk with you.
