Posted on March 5th, 2014
Specialists expect the home prices to keep rising in 2014, but slower and steadier than 2013. The recovery from the housing crises made home prices jump almost everywhere. According to data by Clear Capital, a company dealing with analysis of the real estate market, the prices of homes increased in 225 out of the 276 cities they tracked in year 2013, and the increase nationwide was of 10.9% on the average – a good news for everyone who has been looking to refinance their mortgage or even to sell their home.
What to expect?
What we saw in 2013 was buyers trying to buy homes while they were still low-priced, hence trying to outbid other buyers and investors for the limited selection on the market. The results for the sellers were quick sales and receiving much more than they have asked for.
About a half of the above mentioned 276 cities saw a home price increase of above 10%, the leader being Las Vegas with 32%. According to Alex Villacorta, vice-president of Clear Capital, this represents an ongoing correction to the overcorrection. While buyers tried to get some of the cheapest homes on the market last year, the situation is still far better than what we had in 2006 – on the average, the homes are still priced about 31.5% lower than in 2006, and if we assume a mortgage rate of 4.1%, now the mortgage is 15.6% of the monthly family budget compared to 23.5% in mid-2006.
According to Clear Capital, we will see a rise of 3%-5% nationally, which is comparable to the historical trends. Kiplinger predict 4% rise this year. On the other hand, according to a non-profit association of businesses, the Conference Board, there have not been so many buyers intending to get a new home since year 2000. A lot of them are young people who could not allow new homes and lived with their parents until the jobs situation improved. According to Celia Chen from Moody’s Analytics, this year we will see an economy expand big enough to allow young people to move out. Some of them will start with renting, but most of the renters will try buying a home since the rents are quite high while the vacancy rates are still really low.
According to CoreLogic, about 3.5 million homeowners are not underwater anymore after the rising of prices from the end of 2012 onwards. This means that before the end of 2012, their homes were in a negative equity and they had to pay for a mortgage that was worth much more than their home. Now that the equity is restored, homeowners will start selling and buying homes, especially in Nevada, Georgia, Michigan, Florida and Arizona, where the number of affected owners was the highest.
A sellers’ market
In 2013 we saw the sales of condos and existing homes increase with 11% to 5.29 million sales, which was one of the highest level for the last four years. According to the National Association of Realtors, this will continue this year as sales have increased in all regions in the USA and in all price categories except one, which means that we are witnessing a broad-based recovery.
Entry-level home sales ($100,000 or less) were down with 50% in the West in 2013, but they are continuing to rise in the Northeast as the job recovery there was a little behind. The highest rise is observed with homes priced $750k – $1 million. Currently, the supply of homes in the USA stands at 5 months’ worth, which means that it will take 5 months at the current pace of sales to get everything sold. A market balanced between buyers and sellers usually has a six months’ worth, but Washington D.C., Northern Virginia and other areas had a two months’ worth in September. All this means that there is a shortage of homes on the market and this will continue in 2014, which is great for the sellers!