Most housing markets are expected to continue rebounding this year, but price increases will likely be only half of the 11 percent nationwide gain posted in 2013.
Q: Home prices and sales in our area rose pretty sharply in 2013. Are they expected to stay strong this year?
A: Most experts say 2014 should be another good year for housing, though sales likely will level off a bit and price gains probably will be roughly half of the 11 percent increase that the typical U.S. homeowner enjoyed in 2013. I’m devoting this week’s entire column to provide a peek at how real estate may fare in the year ahead.
Q: Which U.S. markets are going to be the strongest?
A: It depends on whom you ask. Dozens of research firms and other pundits recently have released their forecasts for the “hottest housing markets” for 2014, and their predictions vary wildly.
One of the most comprehensive reports was issued by realty services giant Zillow.com, which combined a variety of factors ranging from an area’s average home prices to its unemployment rate and population-growth trends. Salt Lake City topped the list, followed by Seattle; Austin, Texas; San Jose, Calif.; and Miami.
Rounding out the Top 10 are Raleigh, N.C.; Jacksonville; San Diego; Portland, Ore. and Boston.
Q: Will interest rates keep going up?
A: Probably. Economists at the National Association of Realtors say rates on 30-year fixed mortgages likely will rise above 5 percent by midyear as the economy continues to slowly pick up steam. Today, it’s 4.5 percent — already up more than one full percentage point from a year ago.
In addition, officials at the Federal Reserve recently announced plans to “taper” the massive bond-buying program it has been using to stimulate the economy during the past few years. Those past purchases have helped to keep mortgage rates low.
The bottom line here is that if you’re planning to buy a house this year, start calling some lenders and mortgage brokers now to get pre-approved for a mortgage so you can jump on a good deal before prices and rates move even higher. If you don’t plan to move but haven’t refinanced already, it probably would be wise to do it right away.
Q: Why are price increases expected to slow?
A: There are a few reasons why most economists are predicting a more modest 5 percent or 6 percent gain in values in 2014, which is about half that in 2013. Last year’s double-digit price gains have already knocked some would-be buyers out of the market, and the expected rise in rates won’t help. Fewer buyers translate into more moderate price increases.
Moreover, new-home construction this year is expected to take off as the economy improves. That’s good news for the long-suffering homebuilding industry and its workers, but also means that the buyers who will still be out there will have a larger selection of homes to choose from — thus taking away some of the negotiating clout that sellers of existing homes have enjoyed for the past few years.
Q: Is the foreclosure crisis over?
A: It’s not over, but the end is in sight. The number of foreclosed homes on the market has dropped sharply in the past several months, in part because banks have sped up their marketing efforts to take advantage of the rebound in home prices.
That same rebound has allowed many financially troubled homeowners to finally build up enough equity to qualify for a refinancing loan and bring their payments up-to-date, rather than losing the property to their lenders.
Q: Are there any major changes that Congress is expected to make to housing-related tax deductions?
A: It seems as if housing tax write-offs are always on the table in Washington, but it’s doubtful that any major changes will be made in 2014. Most legislators are wary of doing anything that might hurt the industry’s recent rebound.
Perhaps more importantly, this is a midterm election year in which all 435 seats in the House of Representatives and 35 of the 100 seats in the Senate will be up for grabs. Lawmakers likely will be more focused on campaigning for re-election rather than doing their jobs, and they certainly don’t want to approve any tax-overhaul bill that would anger their home-owning constituents.
Write David Myers at P.O. Box 4405, Culver City, CA 90231-4405.
