The latest Real Estate news should bring a collective sigh of relief to agents and Realtors throughout the United States. After the past few years of stabilization in market across the U.S., experts predict that 2014 may be the year the overall industry may turn the corner. But, the market does continue to face significant challenges, including rising home prices and tight lending standards.
First the good news — The market is expected to continue to strengthen and stabilize in 2014. Prices, which had taken a nosedive since the 2007 crash, are continuing to recover. This resulted in home prices increasing a whopping 11.2 percent on average last year, according to the S&P/Case-Shiller home price index. Some regions, such as California and Arizona, saw average prices increase upward of 20 percent.
Homeowners seeing a marked increase in home equity. According to CoreLogic, 75 percent of homeowners with a mortgage had equity in their homes in the fourth quarter of 2011. By the second quarter of 2013 this number had surged to 85 percent. These stats are undoubtedly due to historically low mortgage rates, and the influx of first time homebuyers.
Now the Challenge for Real Estate Agents — The rise in home prices shows the market is rebounding, but it's not all roses and sunshine. Due to the increase in home prices the first-time home buyer is quickly being priced out of the market. This is not all bad news, as the rise in home prices may allow those who are looking to "trade up" more opportunity to sell their existing homes, and purchase larger ones. This has experts predicting larger volume sales this year and next. Because buyers have not fully turned the corner from the fiscally conservative mindset, sales of existing homes are expected to far outstrip sales of new construction in the near future.
The X-factor in home sales continues to be lending. According to Ellie Mae, the average FICO for purchase loan transactions in 2013 was 756. Startlingly, the average FICO for rejected applications was 729. This shows that a large section of society still cannot qualify for a conventional mortgage loan, which means plenty of pent-up demand down the road. For now, only those with stellar credit, or a large chunk of cash, are realistically in the market for a conventional loan.
What do you think of the market’s recovery? Let us know in the comments section, below.