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
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