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 darcy@windermere.com
Until next time,
la chasse au bonheur
