Looking Forward to 2014

400 4 St W-D5794607Investors—who helped re-energize many U.S. real estate markets in addition to our own—appear to be moving on now that home prices are rising.  Naturally, their departure is causing many to wonder if our market will continue to prosper as it has over the past two years.

We not only think it will, but also believe it will become a better stabilized market as more buyers purchase with the intent of living in the homes they buy.

This view is shared by the Home Buying Institute, whose mission is to help home buyers make the best-informed decisions.  Last week they issued eight real estate market predictions to help guide buyers into 2014.   Not the least of these is that Florida’s housing market will be one of next year’s big stories.

Here is their full list of predictions:

  1. Home prices will continue to rise in most cities.  To date in 2013, the S&P/Case-Shiller Home Price Index has shown price gains of more than 12%, with home prices rising in all 20 cities factored-in to the index.  In Southwest Florida real estate, median home prices over the past year have risen by 12% or more, depending on the neighborhood and/or price range.  Most experts are predicting an additional rise of about 4-5% nationally in 2014. 
  2.  The hottest markets of 2013 will cool in 2014.  While our Southwest Florida markets performed exceptionally well in 2013, those U.S. markets where prices rose the sharpest—mainly in California, Arizona and a few other cities—will continue to see prices climb, but at a much reduced and more sustainable pace.  Here, the property shortages of the past 18 months are expected to get some relief as investors retreat from the same rising prices that are encouraging more homeowners to list their properties.
  3.  Local economies will drive housing trends in 2013.   Housing markets prosper or decline based on the economic conditions affecting their regions.  When all three of its primary economic drivers stalled during the Great Recession, Florida learned it could no longer depend on tourism, growth and development to keep its engine running smoothly.  Since then the state has made great strides in diversifying its economy by attracting new businesses with the promise of no state income tax, a business-friendly environment and an unsurpassed quality of life.
  4.  Florida’s housing market will be one of the big stories of 2014.  Even as investors retreat, housing demand locally is still rising.  In addition to the large number of baby boomers retiring to Southwest Florida, additional demand is being fueled by local job gains, new businesses moving to our area, rising levels of tourism; and other facets of our improving economy.
  5.  Investors will back off, leaving more room for “regular’ buyers.  While home prices are still well off their peaks, prices have risen just enough locally to send investors in search of investments offering greater returns.
  6.  Market conditions in most cities will continue to favor sellers over buyers.  September property sales throughout Sarasota, Manatee and Charlotte Counties were up by a healthy 12.9% compared with last year.  But our strained inventory of properties was only up by 0.5%.  Sellers will continue to rule as long as supply lags demand.
  7.  The “QM Rule” will define the mortgage market.  The Qualified Mortgage (QM) Rule—as newly mandated by the Dodd-Frank Act—will take effect in mid-January.  Simply put, the rule greatly discourages risky loans by requiring lenders to verify a borrower’s ability to repay the loan based on several key aspects of the borrower’s finances.  These include employment status, monthly mortgage payment; monthly payments on simultaneous loans, mortgage-related obligations; and other debt obligations, alimony and child support; debt-to-income ratio and credit history.
  8.  Mortgage rates will rise above 5% in 2014.  The Federal Reserve is expected to begin tapering the stimulus programs that have helped resurrect the economy.  This will likely cause mortgage rates to reach 5% by the middle of the year.

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