What to Expect from the Housing Market in 2014

I’ve been reviewing trends in the real estate market. At the beginning of each year, the pundits throw out their predictions for the coming year, so I thought I’d do the same.

In 2013 we had an inventory shortage; in other words, we had more people looking to buy homes than sell them. I think 2014 will be another year with low inventory, but probably not as low as 2013.

We also had a lot of foreclosures and short sales because of the housing market crash in recent years. That trend is about over. September 2013 marked the thirty-sixth straight month of reduced foreclosure activity. Without tempting fate too much, it looks like most people who were going to go through a foreclosure or short sale have done so, and the people who are still in their homes have weathered the storm.

The housing recession isn’t over, but it looks like we’re on track for a solid recovery. Housing values have roared back. Rising home prices combined with decreased principal as a result of people making their mortgage payments have resulted in more people with net equity in their homes (i.e., people no longer owe more than their home is worth). In fact, only 13 percent of Californians have a negative equity rate. Almost 800,000 homes moved from a negative equity rate to a positive equity rate nationwide in the third quarter alone last year. More than 3 million moved from negative to positive nationwide in 2013.

The reason this movement is significant, other than making a lot of people happy, is that economic recoveries are based, in part, on how people feel about their situation. Consumer confidence actually affects what happens to the economy. When people feel confident about their economic situation, they are more likely to purchase durable goods and other big ticket items like houses, and this, in turn, helps the economy grow.

Improved net equity rates are also significant because when more people have equity in their homes, they have new options open to them, like borrowing against their homes to purchase goods, make improvements to their home, or send junior to college. And, when people have equity in their homes, they tend to take better care of them, whether it’s to enjoy the homes themselves or to sell them at some point, because they know they’re not making improvements for a property the bank will end up owning.

So, assuming we don’t get any more “help” from state and federal legislation, the housing market is looking up. (If you’re curious about what legislation I’m referring to, check out last week’s column at www.richardselzer.com. Briefly, fee increases that were scheduled to go into effect could have significant impacts on the two biggest American lenders: Fannie Mae and Freddie Mac. If the increases are substantial, that could dampen the recovery. Happily, the legislation has been delayed.)

Interest rates are rising and will probably continue to do so for the foreseeable future. This can slow the recovery a bit, but rates were so incredibly low compared to historical standards that rates would have to increase significantly to slow the housing recovery too much.

And, in case you’re interested, the 41st Annual Crab and Tri-Tip Fundraiser Feast and Auction is scheduled for February 9 from 12:30 – 2:30 pm at Carl Purdy Hall. Tickets are $35. Contact the Ukiah Redwood Empire Lions Club for details at pardini@wildblue.net or 707-463-2238.

Next time I’ll write about household budgeting. If there’s something you would like me to write about or if you have questions about real estate or property management, feel free to contact me at rselzer@selzerrealty.com or visit our website at www.realtyworldselzer.com. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 35 years.

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