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articles about “Year-End Predictions

Trulia’s Housing Predictions: How 2014 Will be Different

Next year looks to be the year of the repeat home buyer, as worsening affordability discourages first timers and investors; also, the buying process will be less frenzied. Hot markets to watch are primarily in the South, Plains, and Mountain states. Rental activity will swing back toward urban apartments, away from single-family homes.

Jed Kolko, Chief Economist
December 11, 2013

The housing market continued its uneven recovery in 2013 and will enter 2014 closer to normal than it was a year earlier. Consumer optimism is climbing back: in Trulia’s latest survey, 74% of Americans said that homeownership was part of achieving their personal American Dream – the highest level since January 2010. Even among young adults (18-34 year olds), many of whom struggled through the recession and are still living with their parents, 73% said homeownership was part of achieving their personal American Dream, up from 65% in August 2011. Rising prices over the past two years have been great news for homeowners, especially for those who had been underwater, and the real estate industry has benefited from both higher prices and more sales volume.

At the same time, the effects of the recession and housing bust still sting: the barriers to homeownership remain high, and a few markets – mostly in Florida – still have a foreclosure overhang. Plus, the housing recovery itself brings its own challenges, including declining affordability and localized bubble worries, especially in southern California.

Barring any economic crises, the housing market should continue to normalize. Here are 5 ways that the 2014 housing market will be different from 2013:

  1. Housing Affordability Worsens. Buying a home will be more expensive in 2014 than in 2013. Although home-price increases should slow from this year’s unsustainably fast pace (see #4, below), prices will still rise faster than both incomes and rents. Also, mortgage rates will be higher in 2014 than in 2013, thanks both to the strengthening economy (rates tend to rise in recoveries) and to Fed tapering, whenever it comes. The rising cost of homeownership will add insult to injury in America’s least affordable markets: in October 2013, for instance, 25% or less of the homes listed for sale in San Francisco, Orange County, Los Angeles, and New York were affordable to middle class households. Nonetheless, buying will remain cheaper than renting. As of September 2013, buying was 35% cheaper than renting nationally, and buying beat renting in all of the 100 largest metros. However, prices and mortgage rates might rise enough to tip the math in favor of renting in a couple of housing markets – starting with San Jose.
  2. The Home-Buying Process Gets Less Frenzied. Home buyers in 2014 might kick themselves for not buying in 2013 or 2012, when mortgage rates and prices were lower, but they’ll take some comfort in the fact that the process won’t be as frenzied. There will be more inventory on the market next year, partly due to new construction, but primarily because higher prices will encourage more homeowners to sell – including those who are no longer underwater.  Also, buyers looking for a home for themselves will face less competition from investors who are scaling back their home purchases (see #3, below). Finally, mortgages should be easier to get because higher rates have slashed refinancing activity and pushed some banks to ramp up their purchase lending. Moreover, the new mortgage rules coming into effect in 2014 will give banks better clarity about the legal and financial risks they face with different types of mortgages, hopefully making them more willing to lend. All in all, more inventory, less competition from investors, and more mortgage credit should all make the buying process less frenzied than in 2013 – for those who can afford to buy. … continue reading
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Housing in 2013: What’s In, What’s Out

What a difference a year makes. 2012 was the year the housing recovery came to life – with the market now stronger than anyone dared hope for a year ago. Here’s what 2013 has in store.

Jed Kolko, Chief Economist
December 13, 2012

One year ago, I wrote: “Even the best possible 2012 won’t get us halfway back toward normal.” That turns out to be true, but barely: the latest Trulia Housing Barometer, for October, showed us that the market is 47% back to normal. And this year, we launched the Trulia Price Monitor–which revealed back in March that asking prices were on the rise–one of the earliest indicators of the home-price recovery. All in all, the housing market enters 2013 with strong tailwinds, but that could change.

Trulia Housing Predictions 2013

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2013’s Top 10 Healthiest Housing Markets

Houston and San Francisco are the nation’s healthiest housing markets heading into 2013. They have solid fundamentals, without the extreme price swings of Las Vegas, Phoenix, or Detroit.

Jed Kolko, Chief Economist
December 13, 2012

Along with our take on what’s in and what’s out for housing in 2013, I’ve got my eye on 10 “healthy” housing markets with solid fundamentals. The healthy markets that made the list have strong job growth (Bureau of Labor Statistics), which bodes well for housing demand; low vacancy rates (U.S. Postal Service)–low enough to encourage new construction, but not so low that inventory and sales are restrained; and low foreclosure inventory (RealtyTrac), since foreclosures tend to hold back recovery.

But why, you might ask, aren’t rising prices included as part of our definition of healthy local housing markets? Because many of the markets with the largest price gains in 2012 were rebounding from huge price declines during the bust, but they still have weak fundamentals, such as high vacancy rates, large foreclosure inventories, or slow job growth. For instance, Las Vegas and Phoenix both have high vacancy rates and large foreclosure inventories going into 2013, despite having year-over-year asking-price increases of 14% and 27%, respectively, according to the November Trulia Price Monitor. And Detroit has a sky-high vacancy rate and is suffering job losses, even though asking prices in Detroit rose 10% year-over-year. Just as losing lots of weight might be part of an unhealthy cycle of yo-yo dieting, big price gains aren’t necessarily a sign of a healthy housing market if they’re being driven by a post-crash rebound, rather than solid fundamentals. That’s why Las Vegas, Phoenix, and Detroit aren’t on the healthiest-markets list for 2013.

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