Where is the U.S. real estate market headed in 2014? Will it continue to rocket upwards? How will inventory availability and the flow of foreclosures play into the market? What does it all mean for those buying homes and investing in real estate?
Certain Uncertainty
This is the time of the year when everyone is making new predictions for the real estate market. Out of nowhere, everyone is an analyst, real estate guru and fortune teller. There are certainly obvious trends that can be loosely based on recent developments and historical cycles, but the truth is that no one knows exactly what 2014 has in store.
There are many factors at play that can impact real estate markets. It is also important to point out that all real estate is local and different cities will progress independently. However, with that said, barring any major, unexpected macro disasters, it is relatively easy to forecast what 2014 will look like:
2014 U.S. Home Prices
While the exact percentage increase varies widely, according to different analysts, U.S. home prices have been rising at a pace of about 10% a year. Compounded by a better economy and more confidence, it is reasonable to expect values to continue on this pace throughout 2014. Some areas will certainly continue to experience significant double digit gains, while others may see positive, yet more moderate traction.
Rent Increases
Large funds and individual amateur investors alike have descended on the American housing market in a huge way over the last few years. With fewer homes to buy, and many individuals not able to qualify for a home loan, rents are expected to keep on rising. This means ever rising spreads and yields for the real estate investors who own these units.
Interest Rates
While borrowers may have avoided any major jumps in mortgage interest rates so far, there is no question rate increases are coming. Many are likely hurting themselves far more than they realize. They are failing to recognize just how large of an impact this will have on their housings costs. However, it is just one of the common side effects that come with easier access to credit.
Foreclosures
Contrary to much of the hype, foreclosures are far from dried up. There are still billions of dollars in residential loans in default across the country and an expert recently featured by UT San Diego said he expected there to continue to be a couple hundred foreclosures a month in the Southern California county alone. This will provide plenty of fuel for those looking for deals and homes to buy.
Real Estate Activity
With billions of dollars being added in equity to the housing market, more and more sellers will list their homes, adding to the units available. While this may be tempered by the speed of sales on high demand and declining distressed sales volume, confidence and plenty of liquidity will keep activity at a pretty brisk pace.
In summation, real estate investors and home buyers both have a lot to benefit by acting now, and the earlier they do, the more of the upward swing they will benefit from. Still, it will continue to be those best prepared for all potential scenarios and that are quick to adapt that will have the edge and see the best long term returns.
