At this time of the year, I like to review what happened in our economy and our market over the past twelve months, and make some predictions for our residential real estate for the upcoming year.
HERE ARE MY PREDICTIONS:
1) Housing Inventory – There are a number of factors affecting our inventory levels. Low interest rates are attracting investors from hedge funds/private equity firms and Baby Boomers to purchase real estate for rentals. The economy is improving and improved consumer confidence has brought more buyers back into the market. Foreclosures are down and short sales are rapidly going away. New construction is still stuttering. These factors are forcing inventory numbers down to record low levels and will contribute to an inventory shortage in 2014.
2) Prices – Prices will increase dramatically in 2014 in part due to shortages in inventory. The median expected house prices should rise over 12% nationally while Washington should rise 14%. Home prices will see a strong upswing in an overwhelming majority of metro areas. City life is luring Baby Boomers and Gen X’rs, and buyers are rushing to buy properties closer to urban centers. Prices will increase by over 20% in markets like Seattle and surrounding areas.
3) Appreciation for High-Demand Areas/Styles – Appreciation will reach over 20% in 2014. Specifically ramblers, urban hubs, smaller properties with high-end finishes, homes for Baby Boomers with aging parents, and homes for Baby Boomers with boomerang children will continue to be in high demand.
4) Interest Rates – The Federal Reserve intends to keep the funds rate near zero until our economy is stronger. This will ensure short-term rates remain low through 2014. With this rate at a historic low (between 0-0.25%) since 2008, the short term Fed funds rate should not raise much before 2015. Longer-term rates will rise in 2014 due to increased activity in housing market and a stronger global economy. Treasury rate will rise to 3.1-3.3, and 30-year mortgages could rise to 5.5% by the end of 2014.
5) FICO Scores – FICO scores for closed loans increased 2007-2012. This made it harder to get a loan. FICO scores on closed loans will reduce in 2014 due in part to easing up lending which will result in another surge of buying in 2014. In 2014 FICO score on closed loans will average below 690.
6) 2nd Home Market – 2nd home sales will continue to see a strong increase due to the passing of wealth from the Silent Generation to Baby Boomers.
7) Remodeling – The demand for traditional remodeling and for lifestyle remodeling will continue to increase due to the demand for floor plans and homes that can accommodate multi-family living. Due to the aging population, bathroom remodeling will exceed kitchen remodeling in 2014.
8) National Unemployment – Our national unemployment rate is down from the 10% high in Oct 2009. We could hit as low as 6.8% by end of 2014.
If you would like more information, please don't hesitate to contact me at 206-915-0916 or via email at email@example.com
Until next time,
la chasse au bonheur