Gabe Cole bought and sold 15 homes last year as part of his sideline as a house flipper. This year, the Newport Beach, Calif., real estate broker anticipates a slowdown because foreclosures and short sales are drying up.
While 2013 was the year of get-in, get-out quick house flips, he expects to do more in-depth remodeling work on higher-priced properties in 2014. “Since there are fewer short sales and fewer foreclosures out there,” Cole said, “there’s less business to go around.”
Many economists agree. They predict 2014 will see more investors retrenching and more buyers putting roofs over their own heads. That’s not the only big change ahead. Home prices are expected to stabilize this year, while homebuilding will be more frenetic.
“The housing market has staged a spectacular recovery over the past year,” Cal State Fullerton economists Anil Puri and Mira Farka wrote in their economic forecast. “More recent data, however, point to a softening of these trends.”
Here are top real estate trends we’re likely to see.
• MORE INVENTORY: Expect to see more people putting their homes up for sale this year, as rising prices bring new equity to underwater homeowners.
Other property owners also may take the opportunity to get their lives off hold and take advantage of higher home prices.
Donald and Stacy McCray are among them. Because of last year’s price gains, they believe now is the time to list their two-story Orange County, Calif., house so Donald McCray, a railroad conductor, can move closer to work in Los Angeles. They plan to put their home up for sale later this month.
• NEW HOME SALES TO RISE: Nationwide, forecasters expect the number of housing starts to range from 1.19 million to 1.25 million, up from 975,500 in 2013.
Builders are compensating for years of sub-par construction levels, said Robert Denk, an economist with the National Association of Home Builders. “There’s a huge construction deficit,” he said.
An increase in homebuilding means new home sales should go up, too.
• MORTGAGE RATES TO RISE: Interest rates for 30-year, fixed mortgages likely will rise this year, averaging somewhere in the 4.9 percent to 5.3 percent range, forecasters say.
That’s still low historically, but well above rates for the past 21/2 years.
The average rate for a 30-year fixed mortgage had been solidly below 4 percent since late 2011. Last summer, it spiked to 4.5 percent.
The Federal Reserve’s decision last month to start reducing purchases of Treasury and mortgage-backed bonds likely will push up mortgage rates. But not wildly.
• CREDIT MAY GET EASIER: After years of tight lending standards, homeowners definitely will have an easier time getting mortgages, said Svenja Gudell, director of economic research for housing website Zillow.
New federal lending standards took effect Friday, meaning some borrowers will get more scrutiny and less money. Chapman University economist Esmael Adibi said lenders will have more leeway with the loans they plan to hold in their portfolios.
• COMMERCIAL RECOVERY REMAINS SLOW: Forecasters say vacancies will drop and rents will rise in office buildings, shopping centers, factories and warehouses. More deals will get done and sale prices for buildings likely will go up.
Nonetheless, the rate of recovery is expected to remain at moderate levels.
Commercial real estate recovery “tends to lag broader economic growth,” said Deloitte & Touche’s 2014 outlook.
