Housing Predictions for 2014

As the end of the year approaches it becomes time for both new year resolutions and also predictions. Here are the predictions from Diana Olick of CNBC.

 

Home sales will rebound: After a brief lull in the fall of 2013, I predict that sales activity will return to the market with more homebuyers. The steep jump in home prices has brought thousands of homeowners above water on their mortgages, enabling them to sell and move. Negative equity has been one of the biggest barriers to home sales since the housing crash. Come spring, there will most likely be more sellers, more homes on the market and therefore more transactions.

 

Home-price gains should ease: Prices will still rise, no question, but probably not as steeply as they did in 2013. Annual gains of more than 12 percent were driven in large part by investors on the low end of the market. As foreclosures ebb and fewer distressed sales are in the mix, prices will moderate. Still low inventories, however, will keep them in the positive.

Rents will rise: Despite the return of home sales, renter nation should continue throughout 2014, as younger Americans and first-time homebuyers are still left out of the recovery. Saddled with student debt and unable to come up with the large down payments required from today's mortgage lenders, this cohort will probably continue to fuel both the multifamily apartment market and the single-family rental trade.

 

Investors will not leave the market: Some have predicted that with rising home prices, the large-scale private-equity investors will leave the newly evolving single-family rental market. Just the opposite. Now that they have built economies of scale and figured out the management, they will most likely settle in for the long haul — perhaps not buying as many new properties, but keeping the bulk of the ones they have. Some smaller investors may opt to sell, but they may sell to the bigger guys rather than to individual-owner occupants.

Mortgage rates will rise: The days of the 3.5 percent, 30-year fixed are over. Rates are already up well over a full percentage point from a year ago and as the Federal Reserve begins its much-anticipated exit from the bond-buying business, I believe rates will inevitably go higher. How much that affects home sales will depend entirely on job and wage growth. Mortgage underwriting will remain tight, but buyers with solid credit should be able to weather slightly higher rates. By historical standards, they are still relatively low. It is less rate and more availability that will continue to hamper sales.