After several years of slow recovery, the U.S. housing market began to show signs of improvement in 2013. Some homeowners saw their home equity grow as home prices rose and single-family home sales increased. However, the market still has its challenges and realtors remain committed to helping build a responsible, sustainable housing market in 2014.
According to National Association of Realtors Chief Economist Lawrence Yun, 2013 was a recovery year, as annual existing-home sales are expected to increase 10 percent over a year ago, totaling just above 5.1 million, and national median existing-home prices are projected to be 11 percent above last year. The 2013 market also experienced a shortage of housing inventory. NAR data showed inventory levels swung from a record high of 11.9 months in July 2010 to a recent low of 4.3 months in January 2013. Recently however, inventories have started to increase—current unsold inventory shows a 5.1-month supply of homes.
“Tight inventory typically means rising home prices,” said Neal Clayton, 2014 president of the Tennessee Association of Realtors (TAR). “This is what we’re experiencing now. Prices have gained 11.5 percent nationwide over the past year, and 5.3 percent in Tennessee, according to the most recent CoreLogic report. An increase in prices has helped lift many homeowners into positive equity again, and foreclosures and short sales have declined. When homeowners benefit from price appreciation and housing equity increases, this helps the economy through greater consumer confidence and spending.”
Despite these positives, housing affordability for some buyers declined in 2013. Mr. Yun predicts affordability will continue to decline in 2014 if mortgage rates continue to rise and particularly if qualifying for a mortgage remains difficult. Tight credit restrictions are preventing some qualified buyers from becoming homeowners and making it more difficult for some homeowners to sell their homes. TAR thinks mortgage availability will only be worsened by regulatory reforms stemming from the Dodd-Frank Act Wall Street Reform and Consumer Protection Act that have gone into effect in January 2014.
“While these new rules reduce risky loan products and establish critical lending protections for consumers, they could also preclude many potential home buyers from entering the housing market,” Mr. Clayton said. “Qualified buyers with good jobs and strong credit histories cannot continue to be turned down for loans. Lenders need to return to sensible lending standards this year.”
Mr. Yun predicts we’ll continue to see healthy gains in existing-home sales this year, and prices will continue to rise. However, he also projects mortgage rates to rise and inventory shortages to continue.
Realtors will remain actively involved with lawmakers to ensure housing and homeownership issues are first on the nation’s public policy agenda this year. Several critical issues affecting housing will continue to take precedence this year—such as delaying further flood-insurance rate increases. Also, as debates surrounding federal tax reform likely heat up again this year, realtors will continue to urge the preservation of property and homeownership tax policies.
Realtors also support legislation and regulations to create healthier housing and mortgage markets, something Mr. Clayton says is vital to the recovery.
“Despite the challenges we face in the coming year, I believe realtors are feeling confident and optimistic about the future of the U.S. housing market, and especially the market in Tennessee,” he said. “Homeownership is an investment in our future, and I believe 2014 will present tremendous opportunities for buyers, sellers and investors.”