The nation’s unemployment rate fell to 7%, it was announced Friday, and the housing market looks like it’s showing significant improvement over its post-recession lows of 2009-12.
That said, there are five big housing trends heading into the new year based on Trulia’s most recent housing barometer index created by Trulia’s chief economist, Jed Kolko.
First, some background on where the market stands right now.
According to Trulia, three of the five key housing benchmarks used to tally the index are almost “back to normal”: nondistressed home sales, the foreclosure rate and home prices are all on the rise right now.
On the downside, new home construction starts are behind schedule, as is young-adult employment. The housing market relies on younger Americans to buy those all-important starter homes, but that portion of the market still leaves plenty of room for improvement.
Here’s a capsule look at Trulia’s “Big Five” housing market predictions for 2014:
Affordability will be a big issue. Kolko says home prices will rise, as will mortgage rates. In that regard, buying is still a better financial deal than renting, but the gap is narrowing.
There will be more homes to choose from. The housing market should see more homes for sale next year as inventory deepens. Kolko says the market will see more “pure” homebuyers as investors take a breather from buying new properties. Kolko adds that banks will be green-lighting more mortgages as credit loosens across the nation.
It will be a year for the “repeat buyer." While first-time buyers may be joining investment buyers on the sidelines, so-called repeat homeowners should take up the slack. Kolko says the built-in equity among repeat homebuyers will make it easier for them to upgrade to a better home.
Prices will level out, but for “healthy” reasons. Homeowners will see the value of their homes rise again, but without the trajectory seen this year. One reason is inventory — with more homes on the market, the entire market will lose some of its financial luster. Fewer investment-only buyers, who usually drive up home prices with aggressive bidding, will factor into the equation, keeping a lid on rising home values.
More people will opt to live in the city. Renters will see more housing options in large urban centers as real estate investors turn to city-based multifamily construction next year. Increasingly, young buyers who are largely shut out of the housing market will turn to urban rentals instead, Kolko says.
End-of-the-year predictions are always fun, but not always accurate. It will be interesting to see how close to the mark — and to the actual market — Trulia and Kolko will be a year from now.
If their data are right, though, 2014 should be a healthy year for real estate.
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