There is no mistaking it, 2013 was a great year for real estate buyers, home buyers and property investors. Everyone enjoyed great prices, low interest rates and much home equity was built all within the calendar year. The aggressive investor indeed was able to capitalize on a great thrust forward in the real estate arena.
Based on all the interactions I have with lenders, sellers, investors, bankers, rehabbers, economists and a large network of people across the country ( and the world as a whole), I have compiled my 2014 investing forecast. In short I believe 2014 will be a great and sustainable year for home buyers and property investors alike.
While I continue to drive home the point of real estate being of a local nature and investing in the proper location is paramount I wanted to give a general overview of what 2014 real estate investing may look like as a whole for the U.S EBG investor dashboard into 2014.
• Economic growth will be positive: employment rate of course is the number one predictor in the health of real estate.
Employment rate has continued to improve throughout 2013 and should continue to improve in 2014, fueled in large part by the housing building industry.
• Mortgage rates of course will gradually increase as the year matures but will likely level off in the mid 5%.
Many things can affect the true outcome of where rates level off and with the current level of uncertainty in the government this may prove to be an optimistic assessment but again I am an optimistic person. Be forewarned however to watch the government’s role on Quantitative Easing when they stop doing this all bets are off and rates will begin to soar. I am trusting we will make it through at least the better part of 2014. To that point, seasoned investors and purposeful investors should be taking this opportunity to get a hedge against the massive inflation coming down our pipeline over the coming years. When government stops their role in artificially keeping rates low they will begin to soar.
• Housing demand will be very strong.
As the builder’s ramp up their building the extreme shortage of inventory should start to subside giving way to a more balanced inventory level as the year matures on.
• Credit will continue to be one of the largest setbacks into the growth of real estate sales
Fannie Mae reduces their loan limits starting Jan 1 2014 which will give a temporary slowdown to the home buyer purchases while the cash strong investor will continue to capitalize on this.
• Home prices will continue to rise throughout the year however at a slower pace than we saw in 2013.
I believe the average market will see about a 4 to 6% yearly growth rate in median prices which is more in line with the long term 50 year average of 6% per year. (Nice and steady) compared to the double digit growth we have seen this past year.
• Home Construction up
50% growth in housing starts is needed as populations continue to increase creating more housing demand. Population in the U.S is growing at a rate of 1 new person (net gain) every 11 seconds. This growth along with the pent up demand of young adults who moved back home during the slow economic times have created a housing shortage.
• Move up Buyers are on the rise
Affluent neighborhoods are in stronger demand than usual as prices are fair, taxes in most areas have been reduced and rates are still low. This group of buyers has the better odds of securing mortgages with less difficulty giving them great buying advantage.
• Distressed properties on the decline
As equity in people’s homes are rapidly raising the number of people giving up on their home loans are decreasing. This of course will continue to help the home’s value balance out.
• Commercial real estate on the rise.
Higher end department stores as well as grocery stores are suggested to be strong. Office space may taper off as technology continues to reduce the demand for offices.
• Multifamily apartments building in high demand.
Builders are building, investors are buying and of course tenant demand is strong. Multi family sector will be very strong in 2014.
• Boomerang buyers are coming back.
Those buyers who have been renting after losing their homes to foreclosures or short sales. The ability to get financing will be the deciding factor of how much impact the Boomerang buyer has on the overall real estate market for the year but it should be a positive impact.
• Foreign Buyers strong and steady.
In many markets foreign buyers have played a huge role in the U.S real estate recovery. The currency exchange controls the demand which changes rapidly. Investors who buy for cash flow may reduce down while the lifestyle investor who purchases second homes continues to be strong.
• Home affordability continues to hold strong.
Prices have risen over the past year but in most markets the affordability is still strong. To see what markets are most affordable you can check them out here. There have been many home buyers and property investors sitting on the sidelines waiting to make sure they buy at the right time. I believe 2013 showed everyone that indeed that real estate in the U.S is in full recovery mode. The best deals to be found were indeed found over the past couple of years. The uncertainty to the markets have made way to a solid understanding the prices are not getting any cheaper, that interest rates are not going to be going down and if you have had plans to buy or invest it is now time to be taking serious action. There is no mistaking that over the next decade people will be looking back at this time frame and wishing they would have done everything possible to get in before inflation hits, prices climb and the buying power diminishes.
There has never been a better time to quote the great John Wayne:
“Don’t wait to buy real estate, buy real estate and then wait”