There was nothing ho-hum about 2013’s real estate scene.
Home prices got off dead center as early as February, and climbed
like the California Screamin’ roller coaster ride at Disney
California Adventure Park. Unpredicted price escalation took hold for
the rest of the year.
Foreclosure filings took a steep fall. The market rumbled toward
recovery, despite pinched inventory and hairpin turns.
Thanks to the national debt ceiling talks, there was even an OMG
moment as the year wound to a close. Economists wagged their fingers
at Washington politics. Consumers took a deep gulp. And, for a spell,
it seemed the Car Land sign that reads, “Dang Near Fainted,” had
popped up on our road to recovery to throw a wrench in the works.
But, it didn’t happen.
As the year rolled to a close, and everyone caught their breath,
seat belts should remain buckled. For 2014, more of the same, perhaps
a milder ride, is predicted. But, still, it’s a conundrum as we
make our way toward a full recovery.
Here’s why:
EXISTING HOMES
Take-Away: The economics of supply and demand
played out. Most expected median price gains of 6 percent. Come
February, an 18 percent median price jump in a region battered by
foreclosure and short sales was a big wake-up call.
The year didn’t disappoint on price. Home prices rose nearly 30
percent in some places. The crescendo, keeping demand sharp, did not
abate.
Around-the-Corner: Price increases helped restore
equity to many homes, and it put sellers back in the ballgame. That
will help bolster supply. But it’s not a seller’s market, yet.
Homeowners who get too aggressive could be left in the dust. Buyers
are still bottom-feeding when it comes to price.
The hunch is, home prices will continue to rise in 2014, but at a
more moderate pace. Affordability will become an issue for some wage
earners here.
NEW HOMES
Take-Away: There’s nothing like that new-home
smell. And, with existing home prices on the rise, there’s been a
gravitational pull toward the new-home market. As construction costs
penciled out,
But the new-home market was hobbled so badly, it will take time to
see a bumper crop of rooftops on the skyline. Building permits rose
by the hundreds in 2013, not the thousands, as they did in the go-go
years.
Around the Corner: This will be another
building-block year. We’re going to start to see more projects in
the pipeline for 2015 and 2016.
DISTRESSED PROPERTY
Take-Away: The much ballyhooed shadow
inventory didn’t materialize in 2013, as some suspected it
would. There was a lackluster start to foreclosure filings in
the first part of the year — filings clocking in at a rate of
about 4,750 notices of default, trustee’s auctions and
take-backs were down about 54 percent from 2012.
By year’s end, filings were just shy of pre-recession
levels.
Short-sale activity hit the skids. Buyers in the midst of
protracted short-sale purchases exposed the hand of lenders who,
as assessments rose, put off close of escrow with demands for
more money. By year’s end, Realtors reported that 80 percent
of all sales involved homes with equity.
Around the Corner: With home equity rising,
and some GDP growth, foreclosure activity could return to a
normal pace. The pool of mortgaged homes that are under water,
meaning the loan is higher than the house is worth, could fall
below 25 percent. A year ago, more than 50 percent of the
mortgaged property was under water.
Keep an eye on the horizon, though: Some analysts see a final
blip in foreclosure filings as the last of the distressed
property is flushed out. T
LENDING
Take-Away: Interest rates ticked up.
Mortgage lending jumped to a five-year high, driven by a sharp
spike in refinancing as borrowers rushed in to lock down some of
the lowest rates in 60 years before beginning a predicted climb
out of the trenches. Any rise from historic lows was not
unexpected. Neither was the Federal Reserve’s announcement it
would start to taper its bond-buying program to $75 billion a
month beginning in January, and lower its long-term Treasury
bond and mortgage-backed securities purchases by $5 billion
each.
Around the Corner: New mortgage rules, with
tighter standards, take effect this year. And, the FHA maximum
loan limit has also dropped 29 percent to $355,350 from
$500,000. These two variables, along with a predicted rise in
lending rates, will make this the year to watch how the housing
market gyrates in response. Money finds a way, so lenders will
likely get creative about how to put buyers into home loans.
Watch closely, as modified lending products come into the
marketplace.
