2014 Real Estate Trends Impacted by New Government Rules, Limited Inventory
NEW YORK ( MainStreet) Limited housing inventory, rising home prices and new government rules are among the factors creating the real estate trends to watch in this year.
"There are still buyers who began looking for a home in 2013 who have yet to purchase," said Jeanette Schneider, senior vice president with RE/MAX Regional Services in Michigan. "These left-over buyers together with the buyers who will begin looking in 2014 will keep competition for existing homes for sale brisk."
The Federal Housing Administration revised its traditional seven-year waiting period to just one year in some cases, which makes it possible for homeowners who lost their home to foreclosure to reenter the housing market as buyers.
"Guidelines regarding foreclosures and when a party can reapply for a mortgage are opening the door to some to re-enter the housing market," Schneider told MainStreet. "These boomerang buyers are expected to increase the amount of competition in the market."
Although 74% of current and potential homeowners expect mortgage rates to be higher 12 months from now, according to a recent Lending Tree survey, local realtors are focused on the fact that a 30-year fixed rate mortgage is averaging less than 5%.
"Mortgage rates remain low which offers buyers great opportunities for home ownership," said Elaine Richheimer, real estate salesperson with Douglas Elliman in Merrick, New York.
However, new Qualified Mortgage (QM) rules, which took effect on January 10, will limit loan options to mortgages that are 30 years or less at a fixed or adjustable rate in order to guard against risky lending practices.
"Borrowers must also pass a point/fee test in order to qualify, resulting in more stringent lending," Schneider said.
In addition, QM loans cannot contain risky features, such as payments that are less than the full amount of interest so that the home loan debt grows each month.
"There are sellers who are working to regain equity in their homes," said Schneider. "During the recession they lost so much value that their home was no longer worth how much they owed on it."
As a result, home inventory will remain limited.
"Because the lack of inventory limits the choices a potential home buyer can make, I anticipate an increase in multiple offer situations," said Bruce Taylor, president of ERA Key Realty Services in Whitinsville, Massachusetts.
Under multiple offer circumstances, buyers who use cash will get preference over buyers with mortgage contingencies. "Buyers will not have much time to make up their minds," Taylor told MainStreet. "Houses will be snapped up quickly and indecisive buyers will be left on the sidelines."
Home prices are expected to continue to rise. For example, in 2012 the average home price in southeast Michigan was $127,401 compared to $154,447 in 2013.