2014 Real Estate

We're not big on forecasts for the sake of forecasts. But since we do happen to live and breathe real estate, we thought it made sense to at least give a few high-level observations about where the market is likely headed next year.

Here goes.

Home sales

We expect sales to continue to outperform 2013 levels in markets with hot economies. Here in Silicon Valley, for example, we don't anticipate any slowing whatsoever. In fact, we're expecting a faster pace all around in this part of the world.

However, this will probably not be the case in all pockets of the U.S. While we expect steady sales and healthy markets, we think that markets where prices may have climbed a bit too high this year and markets that still struggle with low inventory may not see the same incredible summer sale season that they saw in 2013.

Values

While sales will be more intense in some markets and just as steady or slightly cooler in others, home values will increase all around, in our view. This is because demand continues to be really strong. And while home building has picked up pace a bit more this year, it so far hasn't been enough to offset low inventory in markets that really need it. This shortage will create more intense situations for buyers – more competition, more multiple bids.

All of this points to increased home values.

Inventory

As already leaked in the predictions above, you can see that inventory again in 2014 will pose challenges in some markets. The good news is that rising home values have put homeowners in a better place overall this year and pulled a lot more owners out of negative equity. That means more freedom to sell.

Unfortunately, we do still expect lower inventory than demand in certain areas – namely those that have had the worst inventory situations in the last few years. That's because they're still trying to catch up with years of pent-up demand.


Mortgage rates

Mortgage rates are a funny thing. They sit at incredibly low levels, yet every time there's a slight uptick the market goes crazy. Doomsayers start throwing their predictions out that the rise in rates will derail home sales.

Mortgage rates do impact home sales to a certain degree. And while we expect some little increases here and there next year, the Fed hasn't indicated any major moves in the near future that would impact rates – and therefore home sales - on a serious level.

If anything, low rates and their small increases will fuel demand even more as buyers feel more of an urgency to get in the market.

The economy

Trying to predict the economy is like trying to control an angry teenager. It's a volatile situation that's nearly impossible to predict at times.

So far, the news we're hearing is of steady growth. But like many things in housing, the economy's impact on buyers and sellers really is more of a local thing. Where local economies strengthen, their housing markets follow.

There you have it – the five things to pay most attention to when it concerns real estate