All signs in the real estate market are pointing towards 2013 being a great year. Builders are working again, home sales have risen quickly, home values have risen, and interest rates are reasonable, as well as many other signs.
Real estate experts are not optimistic about what 2014 holds, however. The 10% yearly improvements that were seen in 2013 are not likely to continue, if what they say is true. Rather, experts are predicting that certain trends will slow down, and other will simply reverse.
In particular, it is expected that sales of homes will be at roughly 5.1 or 5.2 million, and will reflect a 2-5% increase in prices (down from 2013’s 10% increase in prices). That is great news for potential buyers, but bad news for potential sellers, especially since the amount of underwater homeowners is much higher, at 7 million.
Further compounding the issue is that wages have not risen to match the increase in home prices. Whereas home prices have risen almost 20% over the past 2 years, wages have only risen by about 4%. That is very similar to the recipe that caused the housing bubble burst several years back.
To put the final piece in the puzzle, experts are predicting that, as was the case in 2013, a large chunk of home sales will be what are known as “distressed” sales (foreclosures, short sales, etc.).
Curiously, the one part that experts are optimistic about is mortgage rates. They are not expected to rise by any significant margin next year, although that could change as the Federal Reserve tries to switch to more conservative policies.
2013 has wound up being a fascinating year, but it looks like 2014 is all set to shake things up even more.