We’ve seen a national housing recovery in the last few months with home prices rising nationwide by 11.2%. Many analysts are predicting that home prices will continue to rise in 2014 but at a slower, steadier pace. KCM's housing predictions for this year are especially optimistic, stating they "strongly believe that home sales will skyrocket with increases of 10-15% in 2014."
So we expect to have a busy spring flooded with buyers! We still have our work cut out for us though. Inventory remains tight and both homebuyers and builders face tough lending standards.
So let's delve into the numbers and take a look at what we have ahead for us in 2014!
Low Inventory Sends Prices Up, Especially in Bethesda
You may be hearing people say "It's a sellers' market!" While we're usually suspicious of overenthusiasm in the housing market–remember the bubble that burst a few years ago?–the numbers in this case match up. Home prices are going up largely because home inventory is low. This market shift favors the home seller, giving them a lot of leverage over price and the terms of their sale.
So how low is our inventory? Nationally, the supply of homes for sale stands at 5 months' worth. (Months' supply is a measurement of how long it would take to sell everything at the current pace of sales. A market balanced between buyers and sellers has about 6 months' supply of homes. For example, if 100 homes sold last month, we would need 500-600 homes available for sale.) But in many cities inventory is much tighter. The Washington, D.C., Northern Virginia, and the suburbs of Montgomery County, Maryland had about 2 months' supply this fall and winter.
Many analysts expect this shortage will persist through 2014. According to the National Association of Home Builders, just less than half as many homes were started this year as in a normal market. KCM says a challenge for real estate professionals and builders this year will be to make sure there is necessary inventory to satisfy buyer demand.
In Bethesda the housing inventory shortage is even more acute. RBI reports that the median sold price for single family homes in zip code 20816 for November was $975,000, representing a 15.9% increase from this same time last year. The average days on market for homes sold in November was 35 days, 31% below the 5-year November average of 51 days. So ultimately, what does this mean? It means low inventory is pushing up home values and homes are selling at higher prices and in faster time frames. It's a great time to be a seller!
I know, I know, it's a seller's market. We said this last time too. But we already have buyers who are feeling the pressure of this smaller pool of available homes. With spring–the busiest time of year in real estate–still ahead of us, we expect a highly competitive market. So if you're looking to buy, start looking now! And if you're thinking of selling, you're in luck!
Millennials & Underwaters Entering the Market
While the supply of homes has been decreasing, buyer demand has been sustained and is expected to increase. Some market analysts report that the percentage of consumers who intend to buy a home in the next 6 months is the highest since 2000. And making up a big chunk of these buyers are young people who have been living in their parents’ homes or sharing apartments with roommates due to lack of job opportunities or insufficient income. With the economy picking up, low vacancy rates and higher rents, younger generations are expected to make moves towards homeownership rather than renting.
Many homeowners who have been trapped in their home by negative equity are also expected to emerge on the market. As home prices continue to rise, homeowners who owed more on their mortgage than what their homes were worth are also expected to start selling and buying homes. According CoreLogic, almost 3.5 million homeowners were lifted out of negative equity between the end of 2012 and mid 2013. As home prices and equity rise with the improving economy, fewer homeowners are losing their homes and lenders are agree to more short sales (when homes sell for less than what their owners owe on their mortgages). This pent-up demand will finally be released this year and move-up properties will be in high demand.
Tough Lending Standards and Higher Mortgage Rates
"To buy a home in today’s market, you either need impeccable credit or the ability to make an all-cash purchase," reports The Fiscal Times. We know banks and the government are still scarred from the housing crises we've had over the past few years so we're not expecting credit standards to ease up any time soon. This January, new Dodd-Frank regulations to prevent risky borrowers and risky mortgage products from entering the market will also take effect. The new changes will require lenders to closely evaluate factors like a borrower's debt-to-income ratio, employment status, income, assets and credit history before underwriting a loan.
Additionally, mortgage rates are projected to increase this year. KCM states that while most experts are calling for an increase in mortgage interest rates in 2014, KCM believes "the increase will be more dramatic than is being projected" and that "rates will be closer to 6% than 5% by year’s end."
Stay Informed, Stay in Touch
While consumer education and research is vitally important to any large financial transaction you make, it's especially important that your real estate agent informs you on a higher level. Just like doctors or lawyers, real estate professionals need to remain up-to-date on ever-changing market information and provide you with what you need to know to take care of yourself.
As a real estate company, we are expected to have answers to the toughest questions our clients may ask. We’re here to help make sure you always have the information you need; and we have the tools and communication skills to simply and effectively explain things to you.
While we continue to grow our business and refine the real estate experience we offer to our clients and community, our mission always remains to same: to help you get to your goals. Whether that's selling or buying a house, we're here to help you and get you where you want to be.
I hope this market update and forecast has been useful and informative! Please get in touch if you have any questions about where you stand in the market or if you'd just like to chat about real estate! Wishing you a happy and prosperous 2014!
About Josette
