Spring finally got here, but the season of rebirth isn't fertilizing the housing market especially well. [paragraph] National forecasts call for rising prices and an unusually low inventory, and probably fewer sales than last year. It's a seller's market, for sure, but it's proving tough for them to find another home to buy. [paragraph] New-home starts are the lowest in years. There's concern about the effect of unemployment, job growth, inflation, mortgage interest rates, lending guidelines and foreclosures. But those factors will play out differently in local markets. [paragraph]
Here's a sample of national market forecasts for 2014:
* Joel Kan, director of economic forecasting, Mortgage Bankers Association (MBA), Washington, D.C.: Existing-home sales and prices will be flat with only a 1.2 percent and 1.4 percent increase, respectively. New-home sales, however, will increase 17.4 percent over last year with a 4.2 percent price increase, and an almost 10 percent rise in new-home starts. He expects interest rates on 30-year fixed-rate mortgages to rise to 4.7 percent. "We're seeing a relatively slow but steadier recovery and we're expecting the overall economy to pick up speed," he says. "But now it seems that though housing led us out of the recession, it's no longer leading the recovery."
* Lawrence Yun, chief economist, National Association of Realtors[R] (NAR), Chicago: After an 11 percent increase in existing-home sales last year, there will be no increase this year. Median home prices will rise about 6 percent.
* Steve Murray, president of REAL Trends Consulting Inc. and editor of industry newsletter REAL Trends, Castle Rock, Colorado: Sales will increase 4 percent to 8 percent; prices, 6 percent to 10 percent.
* John Krainer, economist, Federal Reserve Bank, San Francisco: Krainer didn't offer specific price or sales projections, saying that price increases have been robust and may even point to too much appreciation. But inventory remains low--and it's lowest in markets that had higher numbers of underwater homeowners. Homeowners' reluctance to enter the market indicates a "wait and see" mentality.
* Frank Nothaft, chief economist, Freddie Mac: Nothaft expects a 2 percent increase in new- and existing-home sales. Prices will rise 5 percent but that'll be 4 percent less than in 2013. The home-building "depression" of 2010 is lifting, new-home starts are up 50 percent since then and are expected to increase about 19 percent this year.
These start-of-the-year forecasts are trotted out annually and greeted with varying levels of healthy skepticism. So much, in fact, that the website for the Heartland Group at Keller Williams, Sedona, Arizona, declares: "Don't trust national forecasts."
Real estate, after all, is about location. That involves a lot more than which street your house is planted on. The health of state and metro housing markets vary dramatically right now depending on a variety of factors.
But this particular spring home-buying season has a lot riding on it for both lenders and real estate salespeople. New mortgage guidelines and innovative ways to finance deals are just two reasons why a lot of anxious industry professionals on both sides of the closing table are waiting to see how the housing sales numbers actually come in.
Unemployment rates and job growth, inflation and mortgage interest rates, foreclosures and real estate-owned properties (REOs), and lending guidelines are all linked in their market impacts--and they affect every market.
Persistently elevated unemployment rates will affect the real estate industry, and the Federal Reserve will raise interest rates next year when the threshold 6.5...