Things are looking up for the 2014 housing market, based on our own anecdotal evidence, the daily news, and the KCM blog. Why can we expect the trend to continue?
Here are 3 interesting points from KCM blog and David Berson, chief economist at Nationwide.
1. 2014 should be the strongest housing year since the Great Recession
Most economists expect the job market to continue improving in 2014, which will expedite the housing market in a positive manor. Despite the rising interest rates we've previously mentioned, the housing market should still thrive. Mr. Benson states the following:
Most economists expect an improved job market in 2014, with employment growth accelerating and the unemployment rate continuing to decline. That jobless rate drop will reflect more of a pickup in employment than further declines in the labor force participation rate. This will be the key factor improving housing demand this year, even if mortgage rates rise and affordability declines. While the housing market tends to do especially well when the job market improves and mortgage rates decline simultaneously, that combination of events occurs only rarely…People buy homes when their job and income prospects improve – even if it’s more expensive to do so – rather than buy when it is inexpensive to do so but they’re worried about keeping their jobs.
2. Demographics are expected to start favoring housing activity
4.48 million households are expected to be formed over the next 3 years, according to the Urban Land Institute. Who will be occupying these new households? Millennials are expected to take up a large portion. An improving economy and the great statistics on renting vs. buying will likely encourage this particular demographic to choose home ownership over living with mom and dad.
Additionally, more jobs being created will directly translate into the dynamic of more households, which will ultimately raise housing demand. The pace of housing formations from the beginning of 2014 onward should accelerate to an above-trend pace for a couple of years, and therefore, a push in housing demand.
3. Mortgage availability may improve
The rise in mortgage rates already has reduced mortgage origination volumes as refinance activity declines. If mortgage rates rise further this year, as expected, then refinance activity will fall still more.
Mortgage lenders should respond to this trend that Mr. Benson mentions above by easing lending standards to the furthest extent possible, resulting in an increase in new households expected to be created this year. Additionally, as refinancing in the market begins to lighten and slow, mortgage lenders will likely be inclined to purchase money market.
What does this mean for a prospective buyer or seller?
2014 is a looking to be an active, lucrative year for prospective buyers and sellers. An active market means property will be transacted more quickly than during a slow market. Spring is a great season to get active, as we have previously written about, and will help beat the summertime market rush.
Thinking of buying or selling a home? Unsure where to begin, or need assistance? Don't hesitate to send us an email or give us a call, and we'll be happy to help.
