RealtyTrac: 2014 Housing Outlook, 4 Economists Chime In

Four renowned economists — citing an improving economy and a rising home prices — expect price gains even as mortgage rates rise in 2014, according to a yearly survey by RealtyTrac. In the January 2014 issue of the Foreclosure News Report, a group of prominent economists expect a solid 2014, after a  year in which the battered housing market found firmer footing in 2013.

Mark Zandi, chief economist at Moody’s Analytics, is forecasting a 5 percent rise in home prices this year.

“I’m hoping and expecting that policymakers simply do no harm in 2014,” Zandi told the Foreclosure News Report. “That is, they keep the government open and they raise the debt limit in a timely way. If they can accomplish this, 2014 should be a good year for the economy.”

Lawrence Yun, chief economist at the National Association of Realtors, worries that too much federal regulation could hurt the mortgage market.

“It is possible that the new Consumer Finance Protection Bureau may focus too much on lowering default risk and that only comes about from restricting credit only to the top-tier consumers,” said Yun. “The lawsuit threat of mortgages not approved by the government (outside of QM) will greatly hinder other alternative mortgages.”

Mortgage interest rates for 30-year fixed-rate products were hovering around 4.3 percent in January, up from 3.0 percent last year, according to Fannie Mae.

Jed Kolko, chief economist at Trulia, is concerned that the economic recovery hasn’t helped young adults.

“Prices and sales volumes are now near normal levels, but construction activity is still badly lagging thanks in part to slow household formation,” said Kolko. “I’d most like to see the jobs situation improve for young adults so more can form their own households, either as renters or owners.”

Recent employment data have been shaky too. In December, the economy added only 74,000  jobs. Labor force participation, which measures the proportion of people who are employed or looking for work, dipped to 62. 8 percent in December, matching  October’s 35 year low.

Chris Thornberg, principal at beacon Economics, sees new home sales coming to life this year.

“New home sales will be up, but remain well below peak levels from last decade,” said Thornberg. “Existing home sales will remain in their current range, but shift from investor to retail buyers. The home ownership rate will find bottom.”

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