The results show that 2013 was a strong year for real estate in most areas of the country. Low interest rates, affordable home prices, and an improving economy helped fuel a strong housing recovery. Home prices were up in over 80% of the major national markets, with an average nationwide increase in home prices of nearly 11%.
Entering 2014, the housing market is poised to continue growing, but perhaps not quite as rapidly as last year. Home prices have increased over last year, but they are still nearly 33% lower than the peak of the housing bubble in 2006. Most experts believe that housing activity will be more stable this year than last, with perhaps a 3% to 5% increase in home values.
Factors Driving the Housing Market
- Increased Demand: Young people who have been living in their parents’ basements are finally starting to get into the housing market in mass. This trend will continue to the extent that they are able to find gainful employment. If the job market really takes off, then it could be off to the races for the housing market as well.
- Low Interest Rates: Interest rates are up from their all-time lows during last year, but they are still historically low. Expect interest rates to continue to be a driving factor in bringing more people into the market.
- Increased Supply: On the supply side, things are more stable than a year ago. Last year, many areas had very low home inventories, sparking bidding wars often resulting in sellers experiencing quick sales and receiving more than their asking price. This year, expect a greater supply of homes to be on the market as more homeowners look to capitalize on last year’s increase in home values.
- Tighter Lending Standards: In 2014, there will be more stringent requirements in the verification process when qualifying for a home mortgage. Many of the changes in government lending standards had already been implemented by lenders, so we do not expect this to severely affect the market as a whole. Certain borrowers, however, such as those who are self-employed, may find it a little more difficult to obtain financing.
Bottom line: 2014 looks to be another strong year in the housing market, though probably not as strong as 2013. Still, for those looking to buy or sell a home, the stable market offers both sides good reason to jump into the market this year. As always, it is best to speak to a local real estate agent to gauge the market in your area and determine what is best in your particular situation.