The 2014 housing market – 7 key predictions worth noting

2013 saw a continued housing recovery that helped give the economy a needed lift. Experts are predicting 2014 will see the recovery continue in a manner that is more "steady as she goes" versus the extremes we have seen for several years. The bottom line: 2014 is expected to be generally positive for borrowers and agents alike. Here are some forecasting highlights:

Buying activity should increase. The percentage of consumers who intend to buy a home in the first six months of 2014 was the highest since 2000. One factor among several: pent up demand by younger people who had not previously been in a position to buy.¹

Inventories will increase: Housing inventory reached new lows in 2013. A bright note: new construction and rising home prices are expected to put more homes on the market (new and existing) in 2014.²

Home prices will rise – but not at 2013's rate. Home prices are expected to rise between 3% and 5%, not nearly the level of increase seen in 2012. Higher mortgage rates and more housing supply are part of the reason.²

Mortgage rates will continue to rise. Mortgage rates increased approximately a full percentage point in 2013 and economists see that trend continuing. It is generally expected rates will move slightly above 5% in 2014.³

Foreclosures will continue to slow. This positive trend will continue in 2014. As of September 2013, foreclosure activity was already down 33% from the end of 2012.²

More homeowners will continue to return to positive equity. CoreLogic reports that almost 3.5 million homeowners were lifted out of negative equity between the end of 2012 and mid-2013.¹ With prices expected to continue to rise, even at a more modest pace, homeowners should continue to see their way to positive equity in 2014.

Some markets will see a boom due to a "moving" trend. Markets including Portland, Denver, Austin, Richmond, Dallas and Atlanta are among those predicted to appeal to buyers looking to move to smaller homes and more affordable locations. Factors driving these moves: rising home prices and more individuals who were previously underwater now in a positive equity position.²

The new housing market normal

In sum, the housing market is expected to be more predictable in 2014 after a fairly volatile ride in recent years. Most economists are seeing this "even keel" to be a sign that the market is adjusting itself, and that can be a very healthy thing for agents, buyers and sellers. 

Sources:

1. "Housing Outlook, 2014: Home Prices Head Higher," by Pat Mertz Esswein, Kiplinger
2. "Housing Outlook 2014: 10 Predictions From The Experts," by Erin Carlyle, Forbes
3. "Housing Market and Economic Outlook," National Association of Realtors, realtor.org