Every year real estate professionals and analysts make predictions about where the market is headed, what mortgage rates and home prices might look like and so forth. Looking back on some predictions made in 2013 about the 2014 real estate market is a great way to sum up the year and fun way to see if our expectations met reality.
Here’s a recap of predictions and the reality of what the 2014 real estate market brought us.
2013 Prediction: Increasing mortgage rates
2014 Reality?: No
Mortgage rates were predicted to increase this year up to 5 or 5.25% for 30 year fixed rate mortgages.
Since last year however, mortgage rates have actually dropped. Last December rates were at 4.42%, however according to the latest Mortgage Watch rates are now below 4%. Take a peek at Monday’s report to read more about what’s going on in the financial sector and where rates should be headed next.
2013 Prediction: Increasing home prices
2014 Reality?: Yes
RealtyTrac reported in November that the U.S. median home price in October increased to the highest level since September 2008. According to the report Los Angeles had a 9% annual appreciation, Oxnard-Thousand Oaks-Venture had a 7% annual appreciation and San Diego showed an 8% annual appreciation.
We haven’t made it up to the price peak before the market crash however a slower appreciation rate keeps the market more affordable, opening up opportunities for homebuyers.
2013 Prediction: Fewer Investors
2014 Reality?: Yes
According to Corelogic, the October 2014 foreclosure inventory was down 34.1% from September 2014, representing 36 months of consecutive year-over year declines. Fewer distressed homes means fewer investors on the market trying to snatch up deals.
Riverside-San Bernardino area saw a -0.3% point change from a year ago and the Los Angeles-Long Beach area saw a -0.2% point change from a year ago. Foreclosure inventory in these areas is a shrinking percentage of the overall inventory down to 0.9% in the Inland Empire and 0.6% in Los Angeles.
In August, NAR also reported fewer investors on the market as seen by a decline in all-cash sales. Chief Economist Lawrence Yun said, “With a marked decline in all-cash sales from investors, first-time buyers [who rely on financing] have a better chance of purchasing a home now that bidding wars are receding and supply constraints have significantly eased in many parts of the country.”
2013 Prediction: Continued Sellers Market
2014 Reality?: Yes
First of all let’s go over what defines a seller’s market in the industry. A sellers market in real estate is one where there is a short supply of homes available for buyers to purchase. Generally 0-4 months of inventory is considered a sellers market. Months of inventory reflects the approximate time period it would take to sell all current listings given no new listings came on the market.
Last year ended on 2.4 months of inventory and although inventory has come up throughout 2014, we are still experiencing a sellers market in Orange County.
2013 Prediction: Increased condo sales
2014 Reality?: Not quite
According to Trendgraphix data pulled from Orange, Los Angeles, Riverside and San Bernardino counties, condo sales ended the year lower than last year however there were more condos for sale on the market. If the steadily growing inventory of condominiums continues through 2015, it could incentivize first-time buyers looking for a starter home.
Condos for sale rose 9.6% from November 2013 to November 2014 and 15.1% compared to the same quarter last year. Units sold on the other hand dropped 10.4% from last November and 4.8% compared to the same quarter last year.
To get an even more in depth look at the year in review and your local real estate market, check out our monthly real estate market updates. If you have any questions or would like a neighborhood specific real estate analysis, reach out to a First Team agent. You can find an agent online or let us match you with a top agent in your area.
