Thursday, January 30, 2014

The future is bright for the U.S. housing market!

What to Expect in the 2014 Housing Market - Here are five real estate trends to look forward to:

Rising Mortgage Rates – But No Derailed Recovery
The period of economic recovery that follows a recession, like the one the U.S. is currently shuffling through, tends to usher in higher rates. While economic recovery during this post-Great Recession period is hardly stellar, it is undoubtedly occurring; we know that rates will continue to rise as a result. The Federal Reserve is planning on tapering its bond purchases, which will also cause rates to increase.
Some believe that rising rates will derail the housing market recovery, but Kolko disagrees. Why? Compared to historical rates, even those found in the last decade, today’s rates are quite low. This means that rates could rise to 6 percent or higher and consumers would still be able to afford mortgages.
Kolko has also found that rising rates do little to hamper housing market recoveries. They really only affect applications for mortgage refinancing; a half-point increase in a month will cause, at most, a 45 percent reduction in these applications.
More Inventory on the Market
Nobody wants to sell their home when prices are resting at the bottom. As home prices continue to rise, expect more sellers to put their homes on the market.
Rebounding but Still Lagging Construction
Home sales and prices are close to pre-bubble levels, but construction is not. Why? Inventory may be tight, but housing is not. While less than 2 percent of housing units are currently for sale, the vacancy rate of U.S. homes is above 10 percent! This explains why new homes are being built at a rate of 900,000 a year, significantly lower than the normal rate of 1.5 million.
Fortunately, more homes are being built now than before the housing market crash, and construction is sure to increase as the housing surplus decreases.
Rising Home Prices – But No Bubble
Prices are around 11.5 percent higher than they were a year ago and are likely to continue rising in 2014, albeit at a slower rate. Kolko believes these rapidly rising prices do not indicate that the market is in another bubble.
Here are three simple reasons why:
·         Home prices are still below their long-term norm! According to Trulia’s Bubble Watch, U.S. homes are still 5 percent below their long-term norm.
·         Lending is constrained. There are few, if any, similarities between what is going on in today’s housing market and the reckless lending that took place in the early to mid-2000s.
·         No overbuilding is taking place. As previously discussed, there is no flood of inventory entering the market. Builders are playing it safe, preventing overbuilding from rearing its ugly head.
More Long-Distance Moves

Long-distance moves are typically made because of new jobs. As the economy improves and more jobs become available in your area, expect an influx of residents from other counties and states to your market. These consumers will most likely not be familiar with your market, which gives you the opportunity to introduce them to it!

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