2014 is just around the corner and so it’s time to tune into upcoming trends and local predictions for the New Year’s real estate market. Here are our predictions at First Team from our agents and experts on the 5 housing trends to expect in the Southern California market for 2014:
- Mortgage rates will go up
- Home values and prices will increase
- Fewer investors buying up properties and more buyers looking for primary residences
- Seller’s market will continue but cool off
- Condo sales will increase
Increasing mortgage rates
Mortgage rates are predicted to rise, but not too far, up to 5% or 5.25% in 2014. The
Federal Reserve will begin tapering soon and the greater the reduction in Federal government purchases, especially of Mortgage Backed Securities (MBS), the more rates are likely to grow.
It’s a great time to buy now because mortgage rates are still below the historical average so if you’re thinking of making a move, 2014 is the perfect time to jump into the market and start looking! With low rates and increasing home values, now’s the time to buy in order to make a smart investment for your future. Keep a close eye on mortgage rates by checking First Team’s Weekly Mortgage Watch every Monday for an update.
Speaking of mortgages, home buyers also need to be prepared for stricter qualifications on home loans. Come January 10th lenders will be required to prove borrowers’ ability to repay a loan according to new “qualified mortgage” standards. An important statistic to keep in mind is the maximum debt-to-income ratio of 43% that borrowers will need to qualify. The Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, has also announced plans to reduce the maximum loan limits for conventional conforming loans some time in 2014.
Increasing home prices and values
First Team agents and the rest of the real estate world predict a rise in home values and prices for 2014. Moderate predictions are clocking in at a 6-8% increase for Southern California markets whereas others foresee a 10-15% increase.
According to Bill Plattos, Execute Vice President of First Team Real Estate, “2013 has begun the upward progression of the real estate market in Southern California. In the next 3 to 4 years prices and sales will continue to rise bringing us back up to a peak.”
Investors swoop in when home prices bottom out like they have in the past few years, seeking foreclosed homes and short sales to snatch up. However, as our economy strengthens and home values come back up in 2014 there are fewer distressed homes on the market to interest investors. The rise in home values in Southern California and upswing in the economy will also make it easier for current home owners who’ve built up equity to afford a down payment and enter the market in search of a bigger and better home to fit their needs.
Fewer investors also means less price competition and fewer bidding wars for buyers shopping for primary residences. 2014 will be the prime time to buy and sell for home owners who are ready to move on to a better neighborhood, larger home or location offering a more convenient commute.
Continued Home Sellers Market
The seller’s market will continue in 2014 for Southern California and on a national level. However, it will be much cooler than the one we’ve witnessed over the past two years. “The market will get closer to normal – or as normal as the market can be,” says Plattos. “It will continue to cool and inventory will come up to a moderate level, not too low or too high.”
That means buyers need to be realistic about the home they can afford a monthly payment on with a middle income. Home buyers, now is the time to start searching the best deals in Southern California real estate in order to get the most square footage for your money.
Increased condo sales
While single-family homes are still the ideal for prospective home owners and the most popular home purchase, condo sales are picking up. Plattos says, “People are tired of taking care of single family homes which require more maintenance, gardening, etc. Since the recession people have also been living more frugal lifestyles and they will continue to do so in 2014 which will be reflected in more condo sales.”
Home buyers in Southern California are favoring condos not only because they are more affordable, but also because they are located in prime urban areas. Condos and townhomes are closer than single family homes to entertainment, shopping centers and walkable amenities.