January 6th, 2014 12:13 PM by Ron Mastrodonato
The housing recovery is expected to remain strong in the new year, driven by economic growth and an improving employment picture, economists say.
In fact, job growth likely will be one key to driving housing growth in the new year. An estimated 2 million or more jobs will be created in 2014, predicts Lawrence Yun, National Association of REALTORS(R)’ chief economist.
As employment picks up, greater demand for housing is expected to occur and a surge in homebuilding activity. Celia Chen, housing economist at Moody's Analytic, predicts a “homebuilding boom” in 2014 that will spark even more jobs -- from construction workers to manufacturers -- and bring about greater demand for housing overall.
"The homebuilding boom in 2014 drives our strong economic forecast," Chen said. "Homebuilding generates a lot of jobs.
The housing recovery is expected to continue on its path in the new year with home prices continuing to rise (although at a slower pace); sales to rise slightly; and the foreclosure crisis expected to finally draw to an end.
"For the general consumer, the market will be good in 2014," says Lawrence Yun, chief economist at the National Association of REALTORS®. "Home values will continue to rise, but not sharply, but there won't be a decline."
Yun notes 2014 will be the second consecutive year of a “very respectable recovery,” marked by a 20 percent cumulative rise in existing-home sales over the past two years and nearly a 20 percent increase in home values.
However, he notes that existing-home sales will likely plateau in 2014. Sales have already been slowing in the latest reports.
Yun says home prices rose 11 percent in 2013, but growth will likely be slower in 2014 at a pace of 5 percent. The reason for the slowing pace of home prices, he says, is mostly being driven by “less affordable conditions from higher prices and higher mortgage rates.” Thirty-year fixed-rate mortgages are expected to rise above 5 percent in the second half of 2014 (up from a current average of 4.47 percent this week).
"While rates will be higher than what they were, they won't be at a level that will discourage home purchases," says Jay Brinkmann, chief economist at the Mortgage Bankers Association. MBA is predicting interest rates to also average about 5 percent in 2014.
Meanwhile, the distressed housing crisis is expected to fade away in 2014. Daren Blomquist, vice president at RealtyTrac, says that 2014 will likely be the year “we transition back to normal.” About 85,000 foreclosure filings a month nationwide are expected by the first quarter of 2015.
"The market has worked through most of the bad loans that triggered the crisis to begin with," Blomquist says. Still, some loans need to be “cleaned up.”
Source: “How Will Housing Recovery Fare In 2014?” Investor’s Business Daily (Dec. 20, 2013)