Our 2014 Market Forecaset
Should I sell or wait?
The question that I am asked most often by potential clients is, “is this a good time to sell or should I wait until the market improves even more? Maybe even rent the property and see what the market is like this year”?
Everything you see and hear would seem to indicate that the housing market is finally on its way back, especially here in California.
The question we need to ask is; what has been driving this market for the past 18 months?
In a typical real estate market, economic growth coupled with job creation drives growth in the housing market. A secondary driver in our local area has been Bay Area migration in search of more value.
Key Drivers
Up until now, cash investors have been particularly active in the lower end of the market, pushing prices up rapidly. As prices rise, those investors are already starting to move on to other impacted communities. In 2014 there has been talk that these investors may cash out which would create additional inventory, putting pressure on prices.
Earlier in 2013 low inventory of desirable homes resulted in home buyers bidding up prices to a point where they wouldn’t appraise. The market changed in Summer of 2013 as interest rates began to rise.
ready at the corner of Bass Lake Rd. and Serrano Parkway
After a long hibernation, new home builders are back in business with super high energy efficient homes and attractive in-house lender financing that could be formidable competition for the resale market. In a recent promotion earlier this month at Blackstone El Dorado Hills, drew very large crowds.
Recently, we learned that building permits are up a whopping 85% over a year ago in Sacramento County. KFBK has been reporting that this could mean an eventual return to a buyer’s market. New home builders have been scooping up land at bargain prices and should be in a good position to market their homes aggressively.
Say hello to higher mortgage rates
The artificially low interest rates are a thing of the past, in fact we are already looking at mortgage rates between 4.5% and 5%. Rates will once again be tied to the bond market so start watching the 10 year bond yields. Remember, higher rates reduce buying power which usually results in pricing pressure for sellers. Will 6% rates stall the housing market? Read this article from the SF Chronicle.
New lower mortgage loan limits in 2014 could put a squeeze on El Dorado Hills and Folsom Real Estate
There is political pressure to try to ease the government out of the home mortgage lending business and attract more private capital. The Federal Housing Finance Agency plans to reduce the maximum size of mortgages backed by Fannie Mae and Freddie Mac this January. The current limits are $417,000 in most parts of the country. Read this from Wall Street Journal for more details.
My view
We have just completed a major real estate correction in real estate home values albeit still down significantly from the bubble year highs. The economy is finally adding jobs but the vast majority of new hires are part-time.
2014 is an off-election year and anything can happen when politicians running for office want to garner voter attention and everyone in Washington is watching the housing market. If the market stalls, look for more new temporary fixes that might provide additional short term incentives.
Your turn
Break out your crystal ball and see what it tells you about Northern California’s Central Valley job expansion and economic growth in next 12 months.