The National Association of Realtors (NAR) chief economist, Lawrence Yun, offered his 2014 housing market projections at the Realtors Conference and Expo. According to a release from the Expo, Yun says he expects the market share of distressed sales to fall from about 25 percent in 2012 down to 8 percent in 2014.
Meanwhile, he forecasts that we will see a 6 percent rise in the median existing-home price in 2012, with another 5.1 percent increase next year and comparable gains in 2014. It was also projected that existing-home sales would continue the trend they are on now and move higher year-after-year: a 9 percent increase this year to 4.64 million, 5.05 million in 2013, and 5.3 million in 2014.
Yun stressed that the “projections assume Congress will largely avoid the ‘fiscal cliff’ scenario. For the housing recovery to continue, credit cannot further tighten and a fiscal cliff must be avoided. “While we’re hopeful that something can be accomplished, the alternative would be a likely recession, so automatic spending cuts and tax increases need to be addressed quickly,” Yun added.
Mortgage interest rates are expected to eventually increase to an average of 4 percent next year, and inflationary pressure should cause rates to go up to 4.6 percent in 2014, NAR said in the release. Changes in the interest rates will impact housing affordability and leave borrowers with higher monthly payments. As little as a 1 percent increase in the interest rate on a $500,000 home could cost a borrower more than $100,000 over the life of the loan.
This calculates the increased payment required that a rise in interest rate could cause. If the borrower cannot qualify for a higher payment, the form shows how much additional down payment is required if the rate goes up to purchase that specific home.
For a more detailed analysis of how the predicted increase in home prices and interest rates will impact the affordability of housing and your buying power, contact one of our expert Mortgage Advisors. We’d be happy to help you prepare for your next move.