Housing trends in 2013 vs. 2014
As the curtains close on 2013, the industry is squarely focused on the coming years, hoping for a full economic recovery, but is 2014 the year of the housing recovery, given the many years this sector has been beaten down and struggled to regain much lost ground?
“In 2012 we saw the housing market recover and, going into 2013, we expected continuing recovery,” said Lawrence Yun, chief economist of the National Association of Realtors (NAR). “Instead, the recovery accelerated a lot faster than we anticipated, which was great for sellers and for the 75 million homeowners who saw their home values appreciate.”
Part of NAR’s exceeded expectations is in their caution in having optimism, particularly with their chief economist having the authority to be a true economist rather than a cheerleader, which the trade group was accused of with Yun’s predecessor.
But is any of this good enough reason to hold out hope for 2014 being the great year of recovery? Let’s look at the 7 housing trends realtor.com has outlined as a recap for 2013, and we will forecast how each factor will change in 2014, and whether or not we’re in for a big recovery.
1. Housing prices rose quickly
According to realtor.com research, the national median listing price was $179,900 in January 2012 and rose to $180,000 by December 2012, and the pace of price appreciation accelerated quickly over the year to reach a median list price of $199,500 by September 2013.
In 2014, economists agree that home prices will continue to rise, which homeowners that are still underwater desperately need, but no extreme surge is expected, so watch for a healthy pace of improvement to continue in the coming year.
2. Mortgage rates remained low
“We expected mortgage rates to rise in 2013, and they started to increase in the late spring, but they’re still very affordable when you look at rates on a historical basis,” Yun said. “They just aren’t at the super-low point we saw earlier.” According to Freddie Mac, 30-year fixed-rate loans were as low as 3.45 percent in December 2012 and rose to 4.49 in September 2013.
In 2014, some believe rates could dip, some believe they will jump, but the truth is that no one knows, because there are so many moving pieces that could shift the ultimate outcome, but based on 2013, we predict that they will remain low but will, in fact, increase slightly.
3. Bidding wars
The combination of rising prices, low mortgage rates and low inventory led to a sense of urgency among buyers and the return of bidding wars, said Don Frommeyer, president of the National Association of Mortgage Brokers. According to realtor.com research, inventory in 2012 reached a high of 2,083,710 homes on the market, then steadily declined to a low of 1,583,497 homes in February 2013. At the end of September 2013, 2,210,000 homes were for sale, approximately a five-month supply.
In 2014, bidding wars will become the norm in many cities, but not nationally. Smaller cities or areas with lower demand will not necessarily see bidding wars, particularly in the areas most hard hit by the housing crash. Consider this a San Francisco issue, not a Pierre, South Dakota issue.
4. Housing affordability
In one statement, Dr. Yun said, “Housing affordability has come down a little this year because of double-digit home value appreciation and the fact that income isn’t rising in comparable amounts. Rising mortgage rates, even though they’re still low, also have an impact. While affordability right now is at a five-year low, it’s still the fifth highest for the past 30 years.”
Later, he noted that a decline was expected. “Affordability has fallen to a five-year low as home price increases easily outpaced income growth,” he said. “Expected rising mortgage interest rates will further lower affordability in upcoming months. Next month we may see some delays associated with the government shutdown.”
In 2014, we predict that housing affordability will decrease, in fact, it will diminish in specific areas like San Jose or Stamford. Overall, housing will remain affordable, and may even inspire sales, but this metric will be inconsistent across the nation.
5. Cash buyers
Dr. Yun said a continuing surprise is that about one-third of all home purchases were made with cash, a market share that has been consistent for the past three years. While some of these cash buyers are from overseas and some are institutional investors, others are “mom and pop” investors who have had trouble getting financing.
“Even some owner-occupant buyers are cash buyers because of the excessively tight underwriting standards for loans,” Yun said. “Some people are getting help from relatives to buy, and then they plan to take out a home equity loan later to repay them.”
In 2014, cash buyers will remain around one in three, and not just for investment reasons, but because, as Dr. Yun mentioned, lending remains tight. Underwriting may loosen up a bit in 2014, but as an overreaction to the housing crash, it won’t be enough to get buyer behavior to a pre-recession norm this year.
6. Rents on the rise
“Right now we’re seeing replenishment of renters who want to buy homes,” Barry Habib, co-owner and chief market strategist for Residential Finance Corp., said. “At the peak in 2002, nearly 70 percent of people owned homes and 30 percent were renters; now 65 percent of people are homeowners and 35 percent rent. Not only are rents rising faster than home prices in many markets, but there’s pent-up demand from people who don’t want to live at home with their parents and who want to buy a home.”
In 2014, all economists agree that rents will increase, anywhere from 3.0 to 5.0 percent nationally as vacancy rates remain at their best levels in years. It will continue to be a landlord’s market.
So will 2014 be the year of recovery?
On all accounts, housing will continue improving, on that we all agree, but expect to see a steady pace of improvement in the coming year, not a spike – consider it more of the same. Home prices, sales, rents, and mortgage rates will all continue increasing steadily, and while 2014 will not mark a complete recovery to pre-recession norms, this future year does hold a healthy pace of improvement in store.
Austin tops the list of best places to buy a home
When looking to buy a home, taking the long view is important before making such a huge investment – where are the best places to make that commitment?
Looking at the bigger picture
(REALUOSO.COM) – Let us first express that although we are completely biased about Texas (we’re headquartered here, I personally grew up here), the data is not – Texas is the best. That’s a scientific fact. There’s a running joke in Austin that if there is a list of “best places to [anything],” we’re on it, and the joke causes eye rolls instead of humility (we’re sore winners and sore losers in this town).
That said, SelfStorage.com dug into the data and determined that the top 12 places to buy a home are currently Texas and North Carolina (and Portland, I guess you’re okay too or whatever).
They examined the nerdiest of numbers from the compound annual growth rate in inflation-adjusted GDP to cost premium, affordability, taxes, job growth, and housing availability.
“Buying a house is a big decision and a big commitment,” the company notes. “Although U.S. home prices have risen in the long term, the last decade has shown that path is sometimes full of twists, turns, dizzying heights and steep, abrupt falls. Today, home prices are stabilizing and increasing in most areas of the U.S.”
Average age of houses on the rise, so is it now better or worse to buy new?
With aging housing in America, are first-time buyers better off buying new or existing homes? The average age of a home is rising, as is the price of new housing, so a shift could be upon us.
The average home age is higher than ever
(REALUOSO.COM) – In a survey from the Department of Housing and Urban Development American Housing Survey (AHS), the median age of homes in the United States was 35 years old. In Texas, homes are a bit younger with the median age between 19 – 29 years. The northeast has the oldest homes, with the median age between 50 – 61 years. In 1985, the median age of a home was only 23 years.
With more houses around 40 years old, the National Association of Realtors asserts that homeowners will have to undertake remodeling and renovation projects before selling unless the home is sold as-is, in which case the buyer will be responsible to update their new residence. Even homeowners who aren’t selling will need to consider remodeling for structural and aesthetic reasons.
Prices of new homes on the rise
Newer homes cost more than they used to. The price differential between new homes and older homes has increased from 10 percent traditionally to around 37 percent in 2014. This is due to rising construction costs, scarcity of lots, and a low inventory of new homes that doesn’t meet the demand.
Are Realtors the real loser in the fight between Zillow Group and Move, Inc.?
The last year has been one of dramatic and rapid change in the real estate tech sector, but Realtors are vulnerable, and we’re worried.
Why Realtors are vulnerable to these rapid changes
(REALUOSO.COM) – Corporate warfare demands headlines in every industry, but in the real estate tech sector, a storm has been brewing for years, which in the last year has come to a head. Zillow Group and Move, Inc. (which is owned by News Corp. and operates ListHub, Realtor.com, TopProducer, and other brands) have been competing for a decade now, and the race has appeared to be an aggressive yet polite boxing match. Last year, the gloves came off, and now, they’ve drawn swords and appear to want blood.
Note: We’ll let you decide which company plays which role in the image above.
So how then, does any of this make Realtors the victims of this sword fight? Let’s get everyone up to speed, and then we’ll discuss.
1. Zillow poaches top talent, Move/NAR sues
It all started last year when the gloves came off – Move’s Chief Strategy Officer (who was also Realtor.com’s President), Errol Samuelson jumped ship and joined Zillow on the same day he phoned in his resignation without notice. He left under questionable circumstances, which has led to a lengthy legal battle (wherein Move and NAR have sued Zillow and Samuelson over allegations of breach of contract, breach of fiduciary duty, and misappropriation of trade secrets), with the most recent motion being for contempt, which a judge granted to Move/NAR after the mysterious “Samuelson Memo” surfaced.
Salt was added to the wound when Move awarded Samuelson’s job to Move veteran, Curt Beardsley, who days after Samuelson left, also defected to Zillow. This too led to a lawsuit, with allegations including breach of contract, violation of corporations code, illegal dumping of stocks, and Move has sought restitution. These charges are extremely serious, but demanded slightly less attention than the ongoing lawsuit against Samuelson.
2. Two major media brands emerge
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