Sunday, January 5, 2014

Real Estate predictions for 2014 - By Rick Yost

Well 2013 was quite a ride in the real estate world. Record low interest rates and an ever so slowly recovering economy led to increases in home pricing and total homes sold. Markets across the country and right here in Maine improved. While the final numbers are still being totaled, it is safe to say that we saw double digit percentage growth in both price and sales. So, it was it was a good year for homeowners with home values increasing and equity returning. The big question is—what will 2014 bring?
First, I want to share with you what some of the industry experts are predicting for 2014. Then I will give my own hometown predictions.

Zillow, the large real estate search company has four major predictions for the New Year. They predict that home prices will rise 3 percent over the year, mortgage rates will hit 5 percent, mortgages will become easier to get, and homeownership will fall to the lowest point in 20 years.

Diana Olick, a real estate analyst for CNBC predicts that home sales will continue to rise, prices will increase (but not nearly as fast as they did in 2013), mortgage rates will rise, and investors will still continue to be active in the market.

The National Association of Realtors is predicting a 5 percent rise in home prices, rising interest rates, but that sales volume will remain about the same.

I think that we will see home price improvement in the 3 percent to 4 percent range in major Maine markets and commuting communities. Some of the more rural and outlying towns will see slower price gains. The fed has started to taper its buying spree and will continue to taper throughout 2014, this will cause mortgage rates to rise to 5 percent and higher. Rising interest rates and complicated rules will cause an emergence in shadow banking, so we will see more and more lending options available to the home buyers. Traditional mortgage lenders will have more tools in their tool belts. Home sales should rise slightly in 2014, fueled by the growing equity in homes and consumers trying to beat the clock on rising interest rates.

So what does that really mean? It means that housing affordability will shrink in 2014. You will get less house for your dollar due to rising prices and rising interest rates. It will be a good year to trade up or down if either is on your future agenda. Whiles house may sell for more at the end of 2014, any increased value in homes sold will be quickly eaten up by the rise in interest rates.

For example, if you wait to sell your $200,000 home for $204,000, you will profit an extra $4000. Great, but—if you, in turn, buy a $250,000 home and finance $200,000 of that amount at a mortgage rate of as little as a half a point higher (say 5 percent, instead of 4.5 percent), you will pay an additional $1,000 in interest year one. It won’t take very long to eat up your $4,000. The other thing to consider is that the house you are going to buy is increasing in value also. The house you want to buy for $250,000 at the end of 2014 (with a 3 percent price gain) is only worth $242,500 today. 

Now that you know what to expect, act accordingly. 

Rick is a Realtor, real estate author and long-time Windham resident. Please contact Rick with your real estate needs and questions at

1 comment:

  1. We shall set an example to our agents to make sure that our business will go well this year. Just like what they predict, I also believe in these things and I hope my business will also be successful. It is important that we also do something to make sure that things will go better for the future of our investment.

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