One of the indicators that economists pay very close attention to when they evaluate the state of the economy is the real estate market. Based on the current readings that most experts are getting, the economy is slowly but steadily improving.
This is not only good news for economists, but established real estate agencies such as Mike McCann. Real property brokers and agents have had to withstand significant challenges while the market has inched through its recovery.
The good news is that 2014 promises to the best year for the real estate industry since before the collapse of the market seven years or so ago.
Foreclosures are down
One good sign is that foreclosures are on the decline. According to a recent report by the U.S. Department of Housing and Urban Development, foreclosures are significantly down this year compared to the same time a year ago.
In January, there were a total of 30,226 foreclosures nationwide, which is 40 percent lower than January of 2013. And this is actually the lowest that number has been since July 2007.
Home Prices are Rising
Agustino Fontevecchia, an analyst for Forbes, theorizes that home prices will continue to rise, but the rate at which they grow will taper off significantly in 2014, which should create a state of stability in the market that should encourage an increase in home purchases. Fontevecchia says that although prices are 30 percent off their pre-housing bubble peaks, the growing trend in sales means further strengthening of the market moving forward.
The greatest benefit of the rising prices, outside of its signal that demand and market growth are happening, is that many homeowners are returning to positive equity in their homes. The rise in home values is substantial enough that homeowners can take advantage of low refinance rates and pay off their second mortgages with the increased equity that has resulted from rising home values.
Demand is Up
According to a report by CNN, a survey conducted by Zillow revealed that millions of renters would love for this to be the year that they purchase their first home. The report found that in all but 20 metropolitan areas that Zillow surveyed, a minimum of five percent of the residents said they wanted to purchase a home in the next twelve months.
This desire to purchase a home is particularly strong among those who are currently renting. When it came to renters, the number jumped to a minimum of ten percent. When the percentages are converted to hard numbers, they translate to 4.2 million first-time homebuyers.
Mortgage rates increasing
The current mortgage rate is 4.3 percent, which is up 0.8 of a percentage point over a year ago this same time. Although this may be discouraging to some, it does have a silver lining.
Right now, the current lending guidelines make it difficult for some hopeful homebuyers to obtain a loan. As interest rates creep up, the appeal of refinancing will decline among homeowners. This will force lenders to look to homebuyers to replace that business.
Lending institutions may be forced to reduce restrictions to ensure that enough people can qualify for the loans. And everyone wins.