December 27th, 2013
The new year is almost here, and the door will close on a particularly successful year for the housing market. In 2013, mortgage rates hit record lows and the market as a whole made a strong comeback. But can the same be expected for 2014?
Fortunately, most analysts anticipate 2014 will see a similarly positive year with regard to the housing market. Here are some of the top predictions:
Unfortunately, analysts are also expecting mortgage rates to jump in the new year. Zillow predicts they will hit 5 percent by the end of 2014. The new Federal Reserve chief, Janet Yellen, will likely work to keep mortgage rates low by putting money into the market, but rates will still be rising after the central bank announced that it would begin tapering its $85 billion monthly stimulus.
The good news for potential borrowers is that mortgages will probably be easier to get.
"The silver lining to rising interest rates is that getting a loan will be easier," Erin Lantz, director of mortgages at Zillow, told Forbes. "Rising rates means lenders' refinance business will dwindle, forcing them to compete for buyers by potentially loosening their lending standards."
Predictions for the economy
While analysts expect primarily positive housing market reports in the new year, predictions for the U.S. economy as a whole are pretty mixed. A recent report from investment bank FBR, for instance, paints a weak picture of economic growth in 2014.
"Financials, particularly banks and thrifts, outperformed the broader indices in 2013, and, generally speaking, we expect in-line performance at best over the coming year," FBR's forecast said.
On the other hand, some experts believe that solid statistics in the final quarter of 2013 will lead to continued steady growth next year. According to CNBC, Kevin Cummings, an economist with UBS, points to personal spending and consumption levels as factors that will provide a boost into 2014.
"You're already starting to see GDP growth," Cummings told the source. "You're already starting to see better data, and it's all because of the labor market. When the labor market starts to pick up we're going to start to see better consumer data."
Cummings predicts the United States will see year-over-year GDP growth of 3 percent in the fourth quarter of 2014. John Lonski, chief economist at Moody's Capital Market, has a similar expectation at 2.6 percent growth.
"We still have some pent up demand there among consumers for housing and automobiles," he told CNBC. "That still has to be exhausted. I think we'll do better on that front."
What this means for consumers
With mortgage rates expected to rise in the year ahead, now may be a good time for buyers who are on the fence. Rates are still at historically low levels, presenting an opportunity to get a prime rate. Fortunately, for those still planning to house hunt in 2014, lending requirements will be more relaxed, hopefully opening the door to homeownership for many more Americans.