illustration of homes

Real Estate Market 2014: 5 Predictions

illustration of homesExperts have a lot to say regarding the future of the real estate market in 2014 and beyond.  Many economists say the mixture of low inventories and historically low interest rates WILL continue to cause a rise in home values and are the driving force behind the major bidding wars taking place in some markets like the Bay Area. These positive trends are expected to continue for the rest of 2014 but experts caution about rising mortgage rates.

As we head into spring, here are 5 predictions regarding the future of our real estate market:

1. A Return to Traditional Seasonal Levels of Inventory
The “year of low inventory,” as experts call it, began in 2013 fueled by buyer demand combined with our economic recovery. Experts predict inventory should slowly stabilize but we have had no proof of that trend here in the Bay Area.

2. More Homeowners Return to Positive Equity
Approximately 2.5 million homeowners have regained positive equity status but as many as 7.1 million homes, and an estimated 10 million homeowners, have remained underwater. That figure is about 21.1 percent of all homeowners with a mortgage.

3. Mortgage Rates Are Expected to Rise
In 2013, mortgage rates increased by about 100 basis points and are continuing to ascend this year. The Federal Reserve is expected to keep mortgage rates low throughout 2014 by purchasing mortgage-backed securities but experts predict the Feds could begin tapering off of this activity as the economy gets stronger, which might lead to a slight increase in interest rates.

4. A Slowdown in Foreclosures
This year, foreclosure sales are playing a nominal role in the housing market. In fact, foreclosure inventory has dropped to multi-year lows; down nearly 33% since the end of 2012.

5. Home Affordability Declines
According to the National Association of REALTORS®’ Home Affordability Index, the comparison of home prices with income has dropped to a five-year low.

These national numbers tell the story of our economy in general but do not necessarily reflect what’s going on in our local Bay Area communities. That is why I keep up-to-date on home prices, inventory and foreclosure activity here. Whether you are planning to sell or buy, I look forward to sharing my knowledge with you. Just check my website at www.DanielDerVartanian.com, email me at Daniel.Daniel.DerVartanian@sothebyshomes.com or give me a call at (415) 200-7744.