The real estate market has been on an upswing since early 2013. New home sales have increased by 38% since 2013 and this upswing will continue to increase slowly but surely by late 2014. However, foreclosures have decreased as investors snapped up large tracts of foreclosed homes as investments and rent to buy properties.
Now, the emerging trends in the 2014 market are dramatically different. Industry pundits are aware that the market has changed completely in 2014 and the market needs to be watched carefully.
A few of the latest emerging trends in the current real estate market of 2014 are as follows:
New Constructions to Reach Market
Large scale investments by commercial investors into the foreclosure market have resulted in an abnormally tight inventory. Inventory decreased to an all-time low by the end of 2013 but new constructions are expected to hit the market by mid-2014.
Another trend on the rise is that homeowners are taking advantage of rising prices to sell their homes and invest in new properties. These two trends have resulted in an increased inventory of good properties for sale. States like Texas, the Carolinas, Northern California, etc., will see the most construction and availability of new properties as the economy of these states is on the rise. First time buyers are also expected to increase as job opportunities increase in the same states.
Mortgage Rates Will Continue To Increase
Banks have relaxed lending criteria but mortgage rates will continue to rise until late 2014. However, the rates will still be affordable enough to buy a home. Rates will hover around 4.5% and this will make it cheaper to buy as compared to renting. In certain areas like those of San Francisco, New York, Honolulu and San Jose, rates might increase to more than 5% and in these areas, it will be cheaper to rent. Industry watchers state that if interest rates increase to more than 6.5%, it will slow down the market and buying will decrease.
New Mortgage Rules to Protect Buyers and Lenders
To prevent a rerun of the 2009 -2010 real estate fiasco, new mortgage rules are now in effect since early 2014. The Consumer Financial Protection Bureau recently announced that a new rule would ensure that homebuyers could prepay their mortgage at any time.
The Ability to Prepay rule took effect from January 2014 and it protects consumers by allowing them to close loans faster. The rule also cancels risky lending practices like No-Doc and Interest Only, which had contributed to so many homeowners losing their homes in 2009 – 2010. This law builds on the 2010 Dodd-Frank financial-reform law in which the lender is required to verify the borrower’s financial information, employment condition, assets, debts, income, debt-to-income ratio, etc., to ensure that the borrower can repay the loan. This eliminated the No-Doc or Low-Doc loan.
Ideally, these two laws will ensure that consumers get loans that they can repay comfortably.
The real estate market is on an upswing and interest rates are still affordable, making it a good time to invest in the real estate market.
