The housing outlook for 2014 includes steady rises in home prices and increasing interest rates, according to some housing professionals in the Intown market and around the nation.
As a result of the housing recovery, home prices are increasing. This means a bit of good news for those who’ve held out on selling their homes or on refinancing.
“Home prices are showing steady increases due primarily to the laws of supply (low) and demand (high),” says Mike Wright, senior vice president and managing broker, Harry Norman, Realtors Intown Office in Atlanta. Some of the factors that have contributed to that low supply include: buyers holding out to sell until they can get more in line with what their home is worth, fewer foreclosures on the market and a slowdown on new construction.
A Clear Capital Home Data Index Market Report, in fall 2013, indicated that national home prices were up 10.9 percent from 2012. Home prices over the past year rose in 225 of 276 cities tracked by Clear Capital, a provider of real estate data and analysis.
Along with price appreciation, expect higher interest rates, too, particularly on 30-year mortgages. “We believe that interest rates will remain relatively stable, but will continue the slow upward trend,” says Wright, “probably ending 2014 at or near five percent for a conventional 30-year fixed mortgage.”
“As unemployment continues to decrease on a national level, home prices are moderately increasing,” says Michael Rogers, president, Dorsey Alston, Realtors in Atlanta.
The rise will be gradual, not sharp, says Dale Modica, senior vice president and managing broker, Berkshire Hathaway HomeServices Georgia Properties in Atlanta. He expects a strong year for the 2014 housing market, particularly during the first six months. “There are a lot of first-time homebuyers and people with families who haven’t bought yet,” Modica says.
Despite news over rising interest rates, Rogers says there’s no need to panic. “I think it’s important for buyers moving into 2014 to expect interest rate increases, but to have some perspective on those increases,” says Rogers. “It’s easy to be conditioned over the last several years that interest rates could be in the three percent rate. For interest rates to creep up in the fours and fives, that should not create hysteria if buyers can have perspective on interest rate averages over the last 30 years. Interest rates were in high double digits. For someone who’s lived through that time period, a five percent interest rate is a great deal.”
For buyers in the market in 2014, a Realtor can make all the difference, says Lisa Johnson, vice president and managing broker, Atlanta Fine Homes Sotheby’s International Realty. “If we are still in a seller’s market then a buyer needs to be prepared to be somewhat aggressive in making offers, especially if there are multiple offers on the home,” says Johnson.
Wright echoes that sentiment. “Buyers need to realize that they will have to act quickly when they find the home that meets their needs,” he says. “That means getting pre-approved for their loan and not taking a lot of time to make a buying decision. The likelihood of multiple offers on any given Intown property is real, so be prepared and don’t get caught up in a bidding war without having all the information to make an informed decision. Buyers should also budget other important steps in the process: home inspections (often including separate inspections for radon gas, mold, lead-based paint, wood-destroying insects and organisms, among others), a survey, an appraisal, prepaid costs for taxes and insurance.”
The word for sellers?
“Sellers still need to pay close attention to the recent sold price of truly comparable properties,” according to Wright. “While prices have been rising, the lender is still going to require an appraisal before granting the loan. They need to realize that finding the buyer is just the first step. They still have to get through inspections, an appraisal, and the buyer’s loan process before the closing. A professional Realtor is necessary to guide them through the complex process.”
Among the trends expected in 2014, says Rogers: many relocating from the suburbs to Intown to take advantage of walkable communities and the convenience of shopping and playing where they live. He also says condo and townhouse living are in demand as are properties near the Atlanta BeltLine, Ponce City Market and Downtown Decatur.
“Look for increasing emphasis on energy efficiency, high-efficiency appliances, geothermal heating and cooling, solar panels, and similar systems to play a role in buying decisions,” says Wright. “Schools remain important to Intown buyers, even those without children.”
Adds Johnson, “Outdoor living space is still hot. Gold and brass are coming back.”
The bottom line, according to Wright: “Buyers are demanding very purposeful space planning, homes with good flow, and higher-end finishes. Formal spaces are out and are being replaced with actual living space. Large kitchens with adjoining keeping rooms, outdoor entertaining space, and master suites are what’s in demand.”