Good News to Start a New Year
2014 saw a steady build-up of housing momentum that is expected to carry the market into 2015, according to a realtor.com® report.
The 2014 Housing Review points to significant improvements in the U.S. economy overall and low mortgage rates as factors fueling the housing market. However, there are still some factors that continue to hold back a recovery, including tight credit restrictions and a limited supply of homes for sale.
“The strong outlook for 2015 is based in part on the improvements and momentum experienced by the economy and housing in the second half of 2014,” said Jonathan Smoke, chief economist at realtor.com. “With several key factors turning strongly positive, 2014 was a turning point and sets the stage for a stronger recovery in 2015.”
Here are the top 10 trends of the past year, five indications of growth and five limiting factors.
Indicators of a stronger housing recovery
1. Improving economic fundamentals: After an especially harsh winter, the economy picked up steam in spring of 2014 and produced a banner year for new jobs. The GDP was higher and is still trending higher, resulting in stronger consumer confidence.
2. Historically low mortgage rates continued: Mortgage rates declined despite the end of quantitative easing, a monetary policy intended to stimulate the economy. Global weakness, along with actions by the European Central Bank and central banks in Asia, kept our Federal Reserve from increasing the Federal Fund Rate, which kept mortgage rates low.
3. Return to normal price appreciation: After two years of high levels of home price appreciation in 2012 and 2013, price increases moderated throughout 2014. We are finally experiencing increases in home prices consistent with long-term historical performance.
4. Decline of distressed sales: Foreclosures and short sales declined throughout 2014, and while total home sales decreased year over year, normal (non-distressed) home sales increased over 2013. Foreclosure inventories also fell and are forecasted to be down 30% year over year at the close of 2014.
5. End of the era of major investors active in purchases:
Related to the drop in distressed sales opportunities, and against a backdrop of higher home prices, portfolios of single-family homes for rent may have reached their peak in 2014. Large-scale investor purchase activity in the single-family market sector decline, leaving more room for traditional first-time buyers.
Factors holding back the recovery
1. Tight credit standards: Despite historically low rates, many households were unable to obtain mortgage financing because of overlays lenders added to qualification standards in order to limit their risk. As a result, mortgage credit availability did not improve much in 2014.
2. Limited inventory: While absolute inventories increased as 2014 progressed, supply did not outpace demand. Monthly supply of new homes and existing homes remained below normal levels, and the age of inventory was down year over year. 3. Depressed levels of first-time buyers: The number of first- time buyers fell to the lowest level in more than 20 years, according to the National Association of REALTORS®. “But the number of first-time buyers is showing signs of modest improvement,” said Lawrence Yun, NAR Chief Economist. Federal policy actions, such as revised regulations for lenders and new low down-payment programs introduced in December are anticipated to have a positive impact in the new year.
4. Record levels of renters and ever-increasing rent prices:
Continued declines in homeownership rates resulted in record numbers of renters. Rent increases became an inflationary concern in 2014, and looking ahead, the pace of these increases is not slowing down.
5. Lack of recovery in homebuilding and low share of new home sales: Single-family home starts barely increased in 2014 over 2013. New home sales remain far from normal share levels – typically near 16%, they are now around 9%. New home prices increased substantially again this year, revealing that higher priced products are limiting the demand.
If you would like information on your local real estate market, or are first time home buyer not working with a Realtor and would like to schedule a consultation with a qualified Oakland County and Macomb County Realtor, please complete the Lang Premier Properties contact form to have a real estate agent contact you.
Lang Premier Properties are Birmingham Realtors specializing in Oakland County Real Estate. Stephanie is an agent with Max Broock in Birmingham, Michigan. See what past clients have to say about Stephanie Lang. Lang Premier Properties looks out for your best interests when you purchase a new custom luxury home. We always recommend working with an experienced luxury real estate agent when buying a new luxury estate. you would like information on homes for sale, or are first time home buyer not working with a Realtor and would like to schedule a consultation with a qualified Oakland County and Macomb County Realtor, please complete the Lang Premier Properties contact form to have a real estate agent contact you.