By S.E. Slack
Four bold real estate predictions for 2014 are giving both home owners and buyers something to like.
According to Zillow, home values will increase by 3 percent. That’s a significant slowdown for some areas but good news for most of the country. Miami, for instance, is expected to experience a heavy demand for homes in 2014. As home values rise, homeowners in that market will only benefit. Mortgage rates will rise right alongside home values, to a high of 5 percent.
"In 2013, home values rose rapidly – about 5 percent nationwide and more than 20 percent in some local markets,” said Dr. Stan Humphries, Zillow chief economist. In his view, 2014 home value gains will relax considerably due to higher mortgage rates, more expensive home prices and more supply created by fewer underwater homeowners and more new construction.
For buyers, even though mortgage rates will rise, this is welcome news that leads to Zillow’s third prediction.
"The silver lining to rising interest rates is that getting a loan will be easier,” said Erin Lantz, Zillow’s director of mortgages. “Rising rates means lenders' refinance business will dwindle, forcing them to compete for buyers by potentially loosening their lending standards."
Zillow’s fourth predication involves homeownership levels. Despite an easing of lending standards as lenders lose refinance customers and are forced to compete for new buyers, the homeownership rate will fall below 65 percent for the first time since 1995.
The housing bubble of the late 1990s and early 2000s was driven by informal lending standards and irrational expectations of home value appreciation, according to Humphries. That led to an unprecedented level of home ownership among Americans – more than 70 percent were able to purchase a home.
The housing recession and recovery forced homeownership rates back to more normal levels, said Humphries.
“We expect this decline to continue as foreclosures continue to displace homeowners and rental demand continues to be high,” he said.