Our Fearless Forecast for the 2014 Housing and Mortgage Markets…

Happy New Year to all our friends, family and supporters!  2013 was a great year for the The Carol Sawdey Real Estate team and we wouldn’t have success without you.  What are we looking at for 2014??  Here’s where we think the markets are headed:

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After distressed sales lost their hold on much of California’s market, the state’s housing market will continue to improve in 2014, with sales shifting toward primary home buyers and both sales and home prices posting further gains, according to the CALIFORNIA ASSOCIATION OF REALTORS®’ (C.A.R.) “2014 California Housing Market Forecast,”.  We see no reason to disagree with their forecast for the Housing Market:

The C.A.R. forecast sees sales gaining 3.2 percent next year to reach 444,000 units, up from the projected 2013 sales figure of 430,300 homes sold.

“The housing market has improved over the past year, and we expect this trend to continue into 2014,” said C.A.R. President Don Faught.  “As the economy enters the fourth year of a modest recovery, we expect to see a strong demand for homeownership, as buyers who may have been competing with investors and facing an extreme shortage of available housing return from the sidelines.”

C.A.R.’s forecast projects growth in the U.S. Gross Domestic Product of 2.8 percent in 2014, after a projected gain of 1.8 percent in 2013.  With nonfarm job growth of 1.9 percent in California, the state’s unemployment rate should decrease to 8.3 percent in 2014 from 9 percent in 2013 and 10.5 percent in 2012.

The California median home price is forecast to increase 6 percent to $432,800 in 2014, following a 28 percent increase in 2013 to $408,600.

“We’ve seen a marked improvement in housing market conditions in a year with the distressed market shrinking from one in three sales a year ago to less than one in five in recent months, thanks primarily to sharp gains in home prices,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young.  “As the market continues to improve, more previously underwater homeowners will look toward selling, making housing inventory less scarce in 2014.  As a result of these factors, we’ll see home price increases moderate from the double-digit increases we saw for much of this year to mid-single digits in most of the state.”

However, here is their forecast for the Mortgage Market and I’ll let you know why we think that rates are going to go higher than their projections:

“The average for 30-year fixed mortgage interest rates will rise to 5.3 percent but will still remain at historically low levels.”

Most projections we’ve seen have us up to 5.5 percent by the end of the year. However, we believe that the government is not afraid to shoot right past these levels.

Doug Duncan, chief economist for Fannie Mae, has said:

“I don’t think the Fed ultimately would be troubled with a 6.5% mortgage rate.”

And Frank Nothaft, Freddie Mac VP and chief economist, at virtually the same time explained:

“As the economy continues to improve, we expect to see continued upward movement in long-term interest rates… At today’s house prices and income levels, mortgage rates would have to be nearly 7 percent before the U.S. median priced home would be unaffordable to a family making the median income in most parts of the country.”

Only time will tell. However, we feel that rates will be in at least the 6% range by year’s end.  What does this mean for buyers and sellers?

Buyers:  The total payment difference over the life of a 30 year loan between the current rate of 4.6% vs. 6% is approximately $32k for every $100k borrowed.  Borrowing $400k?  That will be an extra $128k over the life of the loan…

Sellers:  With the 6% appreciation being forecast for 2014, that equates to $6k in appreciation for every $100k of value.  That is $24k on a $400k home.  If you are selling in 2014 to buy another home, why would you want to wait?  It could end up costing you a lot more in mortgage interest than you will make in appreciation by waiting to sell.

If you’re thinking of buying or selling in 2014, contact me at (925) 487-2353 or at carolsawdey@gmail.com and we can discuss further. Also, with an increase in value of 28% in California last year, do you know what your home is currently worth?  I can help you with that too – remember, my passion is helping people with their real estate needs and I’m here to help you!

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About CarolSawdey

I'm a Broker/Realtor in the San Ramon Valley. A trusted advisor in the local community: We help people buy and sell homes. We counsel them thoroughly. We negotiate to their advantage. We keep their stress to a minimum. And we love what we do!
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