Glinkonomics: Predictions for the 2014 Housing Market

Glinkonomics (Ilyce’s take on what’s going on in the economy this week), Ilyce talks about predictions for the 2014 housing market. 

If the real estate recovery is a baseball game, we are only in the fourth or fifth inning, which means we are barely half way through. Why do I say that and what are the predictions for the 2014 housing market?

When you look at the recovery, we’ve had a bounce back. Real estate industry observers think the massive uptick in housing prices is about to end, and that prices are going to fall back slightly or stay steady. So what does the rest of the game look like and how is this going to affect you?

Experts from the Urban Land Institute made predictions for the 2014 housing market, and how the rest of the recovery will play out. They revealed the top ten real estate trends in 2014, based on surveys and interviews with real estate developers, investors, lenders, services and builders.

1. Millennials are moving the market, but not as homeowners

This is the number one trend and it has a direct implication for how real estate gets bought and sold.

Generationally, Millennials aren’t connected to the idea of homeownership. A number of the cities have seen increased economic activity in the real estate sector led by this generation, particularly Austin, Seattle, Portland and the Twin Cities in Minneapolis.

While they are investing in real estate, Millennials are not forming new households at the rate they should be. They’re not buying as many homes as their parents’ generation were at their age.

2. Second-tier cities will lead the recovery next year

Investors, developers and builders have developed more interest in cities such as Dallas and Portland, rather than the big 24-hour gateway cities such as San Francisco and New York.

Reason being, the second-tier cities’ housing prices are more reasonable and there are more housing deals to be had.

3. Real estate recovery still hinges on job growth

The slow pace of job growth is still holding back the real estate recovery and that’s not likely to change anytime soon.

Places with low unemployment can expect better recoveries next year, while places still haunted by economic issues won’t.

4. The “smile investing” philosophy is back

According to the Urban Land Institute, real estate developers are interested in “smile investing” once again.

That’s when developers and investors start looking at cities in the Northeast and move south to cities along the Sun Belt: Florida, Texas, Arizona. And then come back up to the Northwest: Northern California, Oregon and Washington state. So we can expect to see more activity in those areas than in the Midwest.

5. Multi-family apartment building will wane

Multi-family building surged from the rising demand for apartments during the recession.

But that’s likely to quiet down in 2014 because supply and demand have swapped places. In fact, there may have been too much multi-family building in 2013, according to one expert.

6. Condo development is still on the back-burner

The condo market hasn’t recovered as much as the the single-family market, and developers don’t want to take the risk of putting up new condos.

Instead, builders and developers are building rental apartment buildings and switching them to condos after 12 to 16 months, depending on market conditions, one expert said.

7. Inventory is coming back

The experts are predicting that 2014 will be the last year that low inventory will aid property prices. Sellers are looking at better profits than they have in years because the low inventory is drying up.

8. The buyer’s market is long gone

Right now, homes are priced to please sellers, and the sellers know they can get eager buyers to buy before interest rates and home prices shoot up even further.

9. Shadow banking is emerging

Some of the surveys suggest that lending standards will loosen next year, but some experts aren’t as sure.

A concept called “shadow banking” has started to emerge and may take on a larger role in the lending market next year. Shadow banking is similar to traditional bank lending, but it’s done outside banks so it can get around bank regulations.

10. The suburban is going urban

There is more interest surrounding urban-minded projects, rather than developing suburban areas. Spots where amenities and public transportation are easily accessible are growing in popularity.

Those are the top ten predictions for the 2014 housing market.

WSB Radio’s Ilyce Glink Show – November 10, 2013

Click the audio link below to listen to the full Ilyce Glink Show on WSB Radio, or go to iTunes and download the show to your handheld device.

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Thanks for listening.


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About Ilyce Glink

Author of 13 books, including the bestselling 100 Questions Every First-Time Home Buyer Should Ask. Writer of the nationally syndicated column, “Real Estate Matters.” Top-rated radio host in Atlanta. Writer for CBS MoneyWatch.com. Managing editor of the Equifax Personal Finance Blog.
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2 Responses to Glinkonomics: Predictions for the 2014 Housing Market

  1. Pingback: Thursday’s need-to-know money news | Ask Liz Weston

  2. Peter Drymalski says:

    I work for a local government agency that supervises and educates members and directors of condominiums and HOAs and resolves disputes between the associations and their members.

    Based on what I’ve seen, I think it will take even longer for the housing market to rebound, at least at the lower end ($400,000 or less). The reason is that an entire segment of the market is not being counted at all. That segment is compose of vacant homes, or even occupied homes, which are not paying mortgages (nor are they paying assessments to their associations, which is how I get involved). I have seen properties go for years (4 years in one case) that are vacant and not paying charges. The banks, however, do almost nothing. They may install a lockbox on the door but they do not foreclose.

    It’ s my impression that these houses are not being counted. They are not paying, but they are not in foreclosure. They are not for sale.

    The result is that the pool of houses being held back are going to go on the market at some point once prices start to improve significantly. But when they do go on the market, the law of supply and demand will tend to hold the prices down and retard the recovery.

    I personally think the banks should be forced to sell these houses or lose them. The vacant properties are causing hardship for the community associations they belong to, but there is no point in the community foreclosing because the mortgage will eat up all the purchase price, leaving nothing for the community. Besides. there are probably buyers who would love to buy a place to live.

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