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Looking Forward to 2014 – What Can We Expect in Housing?

February 9, 2014
From Loan Officer John Hendley

From Loan Officer John Hendley

If 2013 was the year housing started to show solid gains, 2014 is the year it is predicted to return to more normal activity levels, according to research by Trulia. Part of the reason is that Americans are once again returning to a more favorable view of homeownership.

In Trulia’s latest survey, 74% of Americans say they see homeownership as part of their personal American Dream. Even among Millenials, the elusive 18-34 year olds who are typically first-time homebuyers but have avoided property ownership because of unemployment and debt, 73% see homeownership as their long-term goal. That’s up sharply from just 64% in 2011.

As consumer sentiment warms to the idea of buying a home again, what is happening in the market now and what must happen throughout 2014 to continue positive momentum?

The job market must improve and stabilize.  Right now, according to Freddie Mac’s U.S. Economic and Housing Market Outlook for January, unemployment is still high at 6.7%. The result is that 2014 will likely be a year of repeat buyers vs. first- time homebuyers who still find downpayment saving and steady income obstacles to buying a home. In addition, as investors exit the market due to rising home prices that cut into their profit margins, repeat buyers should fill the gap.

Home prices must be affordable as compared to income.  According to Fannie Mae, from 1999-2006, during an exploding housing market, 30-year fixed rate mortgage payments rose by more than 50% of income growth. Today the ratio of payment to income is 60% of what it was in 1999, so experts believe there’s still room for home values to rise and remain affordable.  Trulia looks at home prices a bit differently… it sees homes becoming less affordable in 2014 due to increasing prices and the potential for mortgage rates to rise, but it’s experts also note that owning a home is still more cost-effective than renting in the top 100 housing markets!

Mortgage Delinquencies Must Decline. The good news is that delinquencies are down from their highest levels and now sit at 5.88% according to Freddie Mac. However, they still are well above the national average of 2%.

Home sales, as a percent of total inventory, must rise. Historically, home sales made up about 6% of the nation’s housing inventory, but during the housing downturn, that number plumented to 4%. Experts predict that the number of home sales will rise to 5.77% in 2014.

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