What does 2014 hold for California’s housing market?
The Lawhead Team would like to share some information from Trulia about 5 changes in the housing market from 2013.
- 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 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.
- Repeat Buyers Take Center Stage. 2013 was the year of the investor, but 2014 will be the year of the repeat home buyer. Investors buy less as prices rise: higher prices mean that the return on investment falls, and there’s less room for future price appreciation. Who will fill the gap? Not first-time buyers: saving for a down payment and having a stable job remain significant burdens, and declining affordability is also a big hurdle for first-timers. Who’s left? Repeat buyers: they’re less discouraged by rising prices than either investors or first-time buyers because the home they already own has also risen in value. Also, the down payment is less of a challenge for repeat buyers if they have equity in their current home
- How Much Prices Slow Matters Less Than Why And Where. Prices won’t rise as much in 2014 as in 2013. The latest Trulia Price Monitor showed us that asking housing prices rose year-over-year 12.1% nationally and more than 20% in 10 of the 100 largest metros. But it also revealed that these price gains are already slowing sharply in the hottest metros. How much prices slow matters less than why. If prices are slowing for the right reasons, great: growing inventory, fading investor activity, and rising mortgage rates are all natural price-slowing changes to expect at this stage of the recovery.
- Rental Action Swings Back Toward Urban Apartments. Throughout the recession and recovery, investors bought homes and rented them out, sometimes to people who lost another (or the same!) home to foreclosure. In fact, the number of rented single-family homes leapt by 32% during this period. Going into 2014, though, investors are buying fewer single-family homes; loosening credit standards might allow more single-family renters to become owners again; and fewer owners are losing homes to foreclosures to begin with – all of which mean that the single-family rental market should cool.
Read the entire article for a more in-depth look at the housing market’s future in California for 2014.