Specialists at Freddie Mac and Equifax expect dropping unemployment and economic growth to keep the housing market steady in 2014. This, regardless of climbing rate of interest and anticipated development in housing prices nationwide.
Unemployment drooped to 6.7 percent across the country in December, and the Federal Reserve is expecting that figure to go down below 6.5 percent later on this year. If the Fed is right, it will be the first time ever since the Great Recession began in 2008 that lack of employment will be so low.
What this spells for the housing market is greater purchasing power and a growth in new-home construction, according to Ilyce Glink, managing editor of the Equifax Finance Blog. “The housing market may not return to its pre-recession ‘normal’ in 2014 or even 2015,” Glink said, “but with more Americans employed and able to buy homes, we should see the real estate market, especially new construction housing, continue to pick up steam.”.
This rise in the number of employed Americans matches with anticipated growth in the U.S. overall economy. Frank Nothaft, chief economist at Freddie Mac, says the economy should raise by 2.5 percent to 3 percent in 2014, which should encourage more Americans to buy houses.
Specialists feel this double-edged uptick will sufficient to overcome a 3.7 percent rise in home sale prices country wide (as forecasted by the National Association of Realtors) and an increase in home loan interest rates.
Interest rates hit historic reduced in 2013 and afterwards gradually rose a full percentage point by year’s end. Freddie Mac reported that as of mid-January, rates on fixed 30-year mortgages averaged 4.41 percent; rates on fixed 15-year mortgages averaged 3.45 percent.
Financial experts like Glink welcome the idea of a stable, slowly recovering housing market. “A cooling off in some of the hot markets isn’t a bad thing,” she said. “There were new bubbles forming and threatening to burst in some industry, and a slow-down could bring appreciation back to a more moderate rate.”.
What stays to be observed is just how quick market prices will go up. Equifax warns that if prices climb faster than income, the trend could drive some customers out of the market.
An additional factor to think about is the number of new homes developed by such events as separation, death, or young people moving out of their parents’ homes after finishing college. According to Amy Crews Cutts, chief economist at Equifax, the Great Recession significantly reduced the number of new households created yearly– and she doesn’t anticipate much change in 2014, especially among youths.
Slim job potential customers and financial insecurity among recent university graduates, combined with high student loan debt, may produce a void of buyers that could ultimately trigger pent-up demand for homes, said Crews Cutts. While this scenario is not most likely to play out this year, it’s actually worth watching.