My college professors used to say “It all depends”…
2-3-2014: National Association of Realtors reported about 60% of annual home sales occur during the Feb-June spring selling season…National Association of Home Builders estimated nearly 600,000 new homes will be sold in 2014 (40% increase from 2013)….housing analysts/economists say job growth is more important indicator than interest rate and other factors. Source: WSJ, 1-29-2014, C10.
1-28-2014: Fewer first time home buyers – many reasons including low credit scores, unemployment, and student debt. Source: New Low for First-Time Home Buyers
Update 1-25-2014: The Wall Street Journal (Home Sales Expected to Cool After Big Year – 1-24-2014, Page A2) reported home sales will be rather flat through rising interest rate’s downward pressure on prices and lack of good inventory is putting upward pressure on prices – causing a sort of price stabilization at higher rates make it less attractive to purchase a home.
…more than likely, actions taken by the Federal Reserve and its impact on mortgage interest rates for one thing.
Certainly, it is good news that mortgage foreclosures are at a 6 year low according to news media reporting. But based on consumer confidence reflected in Fannie Mae Survey of Consumer Confidence of US Economy, alot depends on where the economy goes.
Summary: Interest rates were in the low to mid 3’s before June of 2013 and things seemed sailing along. Home prices were rising, home sales were humming, and foreclosures were being acquired by the thousands to clear up distressed inventories. Home sellers started realizing prices were rising and started to put their homes on the market to capture the higher prices. Then in May/June time frame, Ben Bernake mentioned the Federal Reserve may consider withdrawing the 85 Billion per month purchase of Treasuries and Mortgage backed securities..and all of a sudden, the housing rebound hit the brick wall…interest rates rose quickly, have been hovering around the 4% mark in December of 2013, and haven’t returned to the low to mid 3’s since.
With the sudden rise in rates came a sudden downturn in home purchases.
And there lies the outlook for 2014: Rising interest rates, falling demand, and fewer foreclosures and fluctuating inventory levels…in other words…it all depends…on how strong the economy grows. With rising consumer confidence, you’ll see improving housing economy. If stagnant or declining consumer confidence, then the real estate market will plug along. Here is survey results in 2013 of confidence it’s the right time to buy or sell a home.
One prediction: interest rates and home prices will rise: http://www.propertywire.com/news/north-america/us-home-value-outlook-201312108550.html
And since nobody has a crystal ball, even the experts see an up and down year in 2014 with rapid rises and declines in micro markets (i.e., subdivisions or local communities).
Dodd-Frank law, creating the CFPB, is still a joke to resolve any problems that created the real estate crisis. One good thing may be their combination of the Truth In Lending & Closing Settlement statement into an “easier to understand” format, but the majority of borrowers didn’t need the simplified forms. The CFPB also defined the Qualified Residential Mortgage (absent of a down payment requirement). The FHA is going to both increase and require annual MIP for all FHA loans in 2013 and beyond to become “permanent”. That means the annual MIP is never eliminated after the original LTV reaches 78% (per current Federal law).
So how does all this impact you?
Update 4-12-2013: What’s happening in 2013? Some ups and some downs…http://www.forbes.com/sites/morganbrennan/2013/04/12/where-u-s-real-estate-might-be-getting-bubbly/
Parker’s Projections for 2014
– You will continue to hear that the housing prices are rising back up – Well, that all depends on where you look and since all real estate is local – it depends on prices and condition in your subdivision/immediate area. In my subdivision, similar homes but different physical conditions have sold for as low as $59K to as high as $189K. If you need me to run an analysis of your home’s range of prices, let me know but it will depend on prices in your subdivision and within a mile radius.
– There are still millions of homeowners underwater (owing more than their house is worth) and it will take a while to reverse that direction even after the 1 million homeowners helped through HARP and HAMP efforts. The current economy seems to stumble along, but if the economy gets worse next year, expect foreclosures to start rising. Especially since the major class action Federal lawsuit against lenders for non Government loans was settled for $25 billion (and the total estimated public and private lawsuit settlements are about $110 Billion when the dust settles) and impact of Obamacare will be clearer on the full time employees and business decisions to continue employment/operations.
– The Federal Reserve has committed to keep buying $85 Billion of mortgage backed securities and US Treasuries (but is expected to start pulling back early in 2014) to help residential real estate interest rates low until 2014 (same year Ben Bernanke is leaving the Fed and Janet Yellin is replacing him), so this tends to keep real estate purchases and refinance attractive. But keeping artificially low rates for now mean much higher rates to come after that. Higher rates will have a downward pressure on home prices that may offset low inventory. But another factor is the rising inventory of homes based on the recent rise in home prices. So if this current drop in confidence of rising home prices reverses itself, then inventories (supply) of homes will rise, competition increases and prices should fall. If mortgage interest rates also start rising, then many homes will become to costly and unless prices fall, many Buyers will pull back from the market.
– The 2007 Mortgage Forgiveness Debt Act (set to expire once ore on 12-31-2013) if not extended through 2014, will mean those who get foreclosed or agree to short sales will pay income taxes (the loss is considered income by the IRS) on the difference between (what they wind up receiving for your property) less (their expenses plus your loan balance on the property). It also depends on whether the lender’s costs to sell the property are included in that loss and subsequent taxable income. That really stinks that you have to pay income taxes on a loss on a home you no longer own – and that tax liability NEVER disappears!
– At the time of this Blog post, there are about 17,500 residential single family properties for sale on the FMLS (statewide) database, down from 25,000 2 years ago, but up about 9% from (16,000) a year ago;….. 9,100 are now under contact but not closed (down 9% from 10,000 a year ago); and about 13,300 listings expired this year (down about 36% from 21,000 a year ago – but some of them were relisted. Add another 1,000 or so that are for sale by owner or not in FMLS statewide and that accounts for very few choices for Buyers. Low supply may push prices higher. But since many distressed properties were being sold for low prices, no Seller wants to compete against those properties and therefore don’t put their homes up for sale unless driven from necessity or pure desire to move. If Sellers believe the market is getting better, they’ll place more homes on market and increase supply which may drive prices down by having “too” many choices. The major complaint now is that there is not a “good & balanced” choice of inventory. However, it also doesn’t mean there is a rush to buy a home at a premium even though the supply is low, but the nicer homes in good areas get multiple offers. Buyers are still looking for pristine properties with updated kitchens and bathrooms or equivalent within subdivision; very open and uncluttered; and in the right school district.
Another bumpy ride for 2014 in residential real estate!
Stability of rising mortgage interest rates (downward pressure on home prices), increasing inventory of homes for sale (downward pressure on home prices), fewer foreclosures/short sales than we saw in 2012 and 2013, more downward pressure on home prices but pockets of rising prices, current rise in new housing construction to level off with some drops in hosing starts, mortgage interest deduction may be capped at a certain level, mortgage insurance premium tax deduction to end in 2013, lower unemployment levels in early 2014 but rising beginning the 2nd quarter by replacement of full time employees with part time employees (resulting from Obamacare), 2014 will have more employment of temporary part time employees than any other year in history (thanks to Obamacare), more start-up businesses, more mergers of large companies; more retirees filing for early social security retirement, Federal Reserve pullback of Quantitative easing early in 2014, more inflation in consumer prices (even after food manufacturers have reduced the quantity per package and left price alone) may all retard economic growth and the movement and sale of existing residential real estate.