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4 Predictions for the Housing Market in 2014

by Peter Thomas Ricci

What does that impeccable Houston Agent crystal ball have to say about real estate in 2014?

housing-market-predictions-2014-inventory-prices-affordability

Incredibly, another year is almost upon us, and like 2013, it’s bound to supply oodles of twists and turns for our beloved housing market.

Though predicting the future is a notoriously fickle business, here are four larger trends that should be on your radar for the New Year:

1. Housing Inventory Will Continue to Rise – Recent data suggests that housing inventory bottomed in early 2013, and as the housing market fundamentals continue to improve in 2014 (more on that in a moment), it’s likely that more sellers will finally hop off the fence and list their homes. Though we can’t say now much inventory will increase, we’re fairly confident that it will not fall below 2013’s historically low levels, though local irregularities will continue in certain markets.

2. Positive Equity Will Keep Pace – As we recently reported, home price gains lifted more than 750,000 homeowners back into positive equity in the third quarter of 2013; though price increases will slow as inventory picks up, they will still rise on the greater market activity that many analysts are anticipating next year, which will only lift further homeowners out of negative equity.

3. Mortgage Rates Will Rise – As the economy improves, mortgage rates will naturally rise above their historic lows, but the really instigator will be the same federal body that has kept them so low for so long – the Federal Reserve. The Fed is widely expected to end their quantitative easing program, which has pumped billions upon billions of dollars into the economy to keep interest rates low; without that infusion, it’s all but guaranteed that banks will increase rates.

4. Home Affordability Will Fall – With both mortgage rates and home prices increasing, housing affordability will continue to wane; already in 2013, it had fallen to a five-year low. Though lending standards are expected to wane somewhat with the appointment of Mel Watt as head of the FHFA, the fundamental components of affordability – mortgage rates and prices – will continue to increase.

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