Data provided by Real-estate Business Intelligence, a subsidiary of Rockville-based multiple listing service MRIS, showed that the median sales price, the number of homes sold and the number of homes for sale were all up compared to a year ago and that the slowdown in the housing market as a result of the federal government’s partial shutdown in October was just a speed bump on the road to recovery.
Although the median sales price for the metro region fell for the fifth time in the last six months, it was nearly 10 percent higher last month than in December 2012. Since tying its record high of $440,000 in June, the median sales price for the D.C. area has fallen nearly $50,000 to $391,362. Still, last month’s median sales price was more than $30,000 higher than December 2012 and the highest December-level in six years.
Market Appreciation ~ The housing recovery hit high gear in 2013 with bigger than expected price gains and solid home sales. Home prices were the highlight of the 2013 housing market, up 12.5%, CoreLogic says. Prices are now 20% off their 2006 peak after falling more than 30%, shows the Standard & Poor’s Case-Shiller index.
This year growth isn’t likely to be as exciting. Instead of double-digit price gains, look for single-digit ones, economists say. Most economists expect growth to be between 3 to 6% in 2014. They attribute this smaller growth to more homes entering the market, fewer investors bidding for homes and higher ownership costs including interest rates and home prices. U.S. housing remains 4% undervalued when compared with other economic fundamentals, such as consumer incomes and the cost to rent, says Jed Kolko, Trulia economist. To put this number into perspective, at their 2006 peak, home prices were 39% overvalued based on the same metrics (Kolko).
Mortgage rates ~ Lawrence Yun, the National Association of Realtor’s chief economist expects the average rate for fixed 30-year mortgages to rise to 5.5% by the end of 2014. Each percentage point increase in mortgage rates makes homes about 10% more expensive in terms of higher housing payments. He says the higher rates and tighter rules will likely drive some home buyers out of the market or into lower-priced homes than they could have afforded last year.
In summary, the housing market is expected to improve at a healthy rate during 2014, although slower than 2013. Buyers may see decreased competition at certain price points. Higher interest rates later this year will mean certain buyers will be able to afford less house than they could at the same time last year.