More modest gains are likely this year, according to the most recent Kiplinger Letter forecast. The national average of appreciation in home values is up 4 percent-4.5 percent, compared with a gain over 11 percent in 2013.
The top stated reason for this increase is rising mortgage rates, will increase by 5 percent or so for 30-year fixed rate loans by the end of the year. Another possible is that fewer investors are offering all-cash deals, with bargain prices and interest rates fading away.
“Building will get a bump this year with just over 1 million new houses started in 2014, the first time starts have passed the 1 million mark since 2007,” says Kiplinger Letter’s Associate Editor Gillian White. “Sales of new homes will also be a bright spot, with 16 percent growth this year, just shy of 2013’s substantial performance.”
Another prediction: More existing homes will go up for sale, as price hikes pull homeowners out from mortgages that are underwater, making them more willing to sell. Sales will climb by 4 percent, but inventory won’t be as tight.
The Kiplinger letter forecasts that new-home building will accelerate again, helping to offset the construction drought of 2008-2012. Keep an eye out for housing starts this year to climb by 15 percent and top 1 million for the first time since 2007.
Affordability, though declining, is still better than the historical norm: A median-price home costing 20 percent of household income. In 2013, it took just 15 percent of income to buy an equivalent home. When mortgage rates rise to 5 percent, it will cost 17 percent of income.
“More moderate growth this year is not necessarily bad news, it signals a more sustainable, long-term growth trajectory that will help quell fears that another bubble is arising,” says White. “Rising rates will also be helpful in some cases, cooling overly hot markets, where cheap rates and high demand sparked outsized price spikes.”
Keller Williams Realty
130 Lincoln Avenue - Ste K
Santa Fe, NM 87501
Keller Williams Realty, Inc. is a real estate franchise company. Each Keller Williams office is independently owned and operated. Keller Williams Realty, Inc. is an Equal Opportunity Employer and supports the Fair Housing Act.
Design By SantaFeWebDesign.com