The U.S. real estate market made a robust comeback in 2013, surpassing expectations of many economists, as the combination of low inventories and historically low interest rates caused home prices to rise and even helped fuel bidding wars in some markets, surpassing the expectations of many economists. While positive trends, such as increasing home values, are expected to continue into 2014, mortgage rates are also expected to rise in the coming year and could put a damper on homebuyers’ abilities to afford new homes.
1. Inventory should gradually stabilize and return to traditional seasonal levels
2. More homeowners are likely to return to positive equity
3. Mortgage rates are expected to rise
4. Foreclosure activity is expected to slow
5. Further declines in home affordability are expected
Source: MSN Real Estate Partner
Tips for 2014 Buyers, Sellers, and Owners
Source: Money CNN
Waiting for more inventory can make sense if you have a dream home in mind. But in 2014 there will be a price for delay — 30-year fixed-rate mortgages are forecast to climb from today’s 4.5% to more than 5%. Housing prices are also on the rise. Virginia Beach saw a 5% increase in median sales price since last year.
If you like your home and are not in a rush to sell, you have great flexibility. For instance, your rising home equity will make it easier to borrow against the property. That can help pay for deferred maintenance or home renovations you’ve been eyeing for years — which will only add value when you eventually put your home on the market.
Remodel within reason. Home-improvement spending is expected to grow by double digits through mid-2014, according to Harvard’s Joint Center for Housing Studies. Atop the wish list: bathroom and kitchen jobs.
Keep resale in mind. While the focus was on value at the market lows, today “homes with all the fixings are the ones attracting multiple buyers,” says McLean, Va., real estate broker Jon Wolford. So, yes, you can splurge a bit, but don’t go crazy. Remodeling Magazine’s cost-vs.-value survey found that moderate kitchen remodels ($57,500) recouped 69% of their cost, close to what minor jobs paid back. Over-the-top projects ($111,000), though, recouped less than 60%.
Take advantage of low home-equity rates. While 30-year mortgages rose nearly a point this year, rates on home-equity lines of credit have fallen a bit to 5.1%. That’s because HELOCs are tied to short-term rates that the Fed isn’t likely to hike until 2015.
If you’ll need to repay your loan over many years, though, go with a fixed-rate home-equity loan. Today’s 6.25% average is about 0.25 points lower than a year ago, as lenders are now more interested in doing deals, says Keith Gumbinger at HSH.com. Credit unions can be the best place to shop for home-equity loans. The average credit union rate is 5.75%.
List too early and you’ll leave gains on the table. Wait too long and rising borrowing costs might put an end to bidding wars. You can’t time the market perfectly, but you can keep an eye on inventory trends. Ask your agent to give you a monthly report on the number of listings compared with closings. Housing trends play out gradually.
Once you see a big uptick in listings relative to closings, you’ll know price gains are getting ready to slow — and that it’s time to act.
Price it right the first time. Don’t waste your time by listing too high only to have to wait and lower the price. “Buyers are smart these days — they know where the market is, and now that rates are higher, they aren’t going to bite on a list price above recent comparables,” says Sara Fischer, an agent with Redfin based in San Diego. The real estate site Zillow reports that about one-third of listed homes in August had a price drop, up from 26% earlier this year.