2014 is set to be a year of many changes for the United States housing market as rising home prices and interest rates test the sustainability of the economic recovery.
While it’s never possible to make completely accurate predictions about what the housing market will be like in the future, there are still good reasons to think that certain trends in housing are more likely than others.
Advertisement
The general consensus among economists is that 2014 will still be a good year for purchasing a new home. However, it will represent a less friendly marketplace than what was observed in 2013 for those looking to purchase a home or refinance.
Interest Rates Set To Increase
If you’re thinking about taking out a home loan or refinancing, you’ll want to keep in mind how interest rates are going to affect your bottom line. The last quarter of 2012 represented a truly golden opportunity for investors and home buyers to get a loan at a low rate. It was possible then to get a 30-year fixed interest mortgage for around 3.5%. Though rates are still low compared to the previous decade, they’ve still gone up significantly since that time.
Moreover, they’re likely to increase more by next year’s end. The Washington-based National Association of Realtors (NAR) predicts that interest rates on long term mortgages could spike to around 5.4% by the end of 2014. There are numerous reasons for this prediction. But one integral component to that forecast is the acknowledgement that the Federal Reserve will almost certainly begin pulling backs some of the support that it has been giving to the economy with its bond buyback program.
Home Prices Set to Go Up
Interest rates are not the only thing likely to be affected in the coming New Year. The National Association of Realtors also expects that home prices will continue to rise, albeit at a more modest rate. For 2013, homeowners have seen the average price of their home go up by around 11%. This has obviously been hugely beneficial to homeowners who have in many cases used the newly acquired equity in their homes to take out loans or refinance to lower rates.
Home prices are expected to go up by a more modest 6% for 2014. One of the factors pushing home prices up has been restricted inventory levels. There simply aren’t enough houses on the market for all of the people who want to buy one. To alleviate this problem the NAR argues that new home construction must go underway in order to keep demand in check. They estimate that it needs to rise by around 50%.
Does all of this mean that the buyer’s market is long gone? Yes, though it still depends on where you live. There are still many parts of the country where home prices remain stagnant and which represent a much more favorable environment for buyers. After all, the first three rules of real-estate are location, location, location. Having said that, sellers are now in an excellent position to get the most they can out of buyers, who are themselves trying to stay ahead of the curve on rising interest rates and home prices.
