Looking backwards is sometimes the best way to plan for the future. For example, if we look at 2013, we’ll see some of the surprising and unexpected turns the real estate market took. Many analysts predicted 2013 would be somewhat sluggish. Instead, some markets saw bidding wars, primarily fueled by low inventory and historically low mortgage interest rates.
Predictions are based on both positive and negative trends like inventory shortages or overages, activity by the Feds and consumer demand.
Let’s look at a few 2014 projections and see how accurate they were.
The close of 2013 saw an uptick in sales, with the median age on the market dropping by more than 10% over 2012 levels. Market analysts predicted the trend would continue in 2014. Some areas, like Las Vegas, Nevada, moved closer to “normal” price points and inventories as cash investor activity slowed. According to Reuters, the close of 2014 showed promise for long-term stability on the horizon, but more time is needed for median home prices to fully stabilize.
Positive Equity Growth
About 20 percent of homeowners with a mortgage found themselves in a state of negative equity during the second quarter of 2013. Realtor.com reported median list prices rose in October 2013 by 7.57 percent as compared to the same period in 2012, leading market experts to predict that as prices continued to rise, 2014 would lift many homeowners toward a return to positive equity levels.
As 2014 came to a close, Zillow reported a mix of positive and negative equity stats.
- Home values did increase, but that didn’t necessarily improve the financial condition for all underwater mortgage holders. Negative equity continued to rise in 21 of the top 50 housing markets.
- Florida and the Midwest reported 25 percent of mortgaged homes remained underwate, with the national United States average for negative equity still high at 16.9 percent.
- Low-end homes were more likely to be upside down than high-end and luxury homes.
- Although negative equity is flattening out, the economic impact on the real estate market will continue to be an issue for the next few years.
Low Mortgage Rates Fade
Real estate investors watched mortgage rates climb substantially in 2013, and with the Fed considering tapering bond-buying, industry experts predicted the rates would continue to climb in 2014, although only slight increases seemed to be probable.
Slight changes in the interest rate did indeed occur. But, prices haven’t continued to rise. According to YCharts the national average for a 30-year mortgage declined over the last quarter of 2014 from 4.20 percent in October to 4.13 percent the last week of December. And, the current rate on April 16, 2015 was even lower – 3.92 percent.
Rates vary among diverse markets, and the fluctuations in recent months have been fairly small, but the current trend indicates we shouldn’t expect significant increases in the coming weeks and months.
Foreclosure Rates Decline
Foreclosure sales played an active part in the housing market in 2012, but September of 2013 marked the 36th consecutive month to experience a year-over-year decline in foreclosure activities. The third quarter of 2013 reported the lowest foreclosure numbers in almost seven years. Forecasters predicted this drastic decline meant foreclosure sales would have negligible impact on the 2014 housing market.
RealtyTrac.com reported a national foreclosure rate of 1:1295 housing units in February 2015 – an eight and a half year low. Much of the success in the move toward normal conditions may be attributed to stringent lending practices and better financial management.
However, not every market is breathing a sigh of relief. In February 2015, New York reported six consecutive months of increased foreclosure activity and Massachusetts reported an increase of 53 percent compared to prior year numbers.
As you can see, predictions based on national averages don’t necessarily reflect conditions in all markets. Following market trends and staying abreast of surveys and research provide valuable insight into the industry. But, it is imperative to consider the unique market fluctuations within your region. What happens in New York or Florida may not be the same thing as what is happening in your own backyard.