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Housing Problem Solvers
Housing Problem Solvers
Real Estate Crystal Ball: Economists Predict Job Growth will be Deciding Factor in 2014 Housing Market
|Posted on December 31, 2013 at 7:57 AM|
The National Association of Realtors (NAR) is feeling good about the jobs market in 2014, and that means good news for housing. According to NAR chief economist Lawrence Yun, “2 million or more jobs will be created in 2014.” This surge will create a demand for existing homes and create a leap in homebuilding activity. Moody’s Analytics analyst, Celia Chen, said that this original surge will likely be the key to a full economic recovery – assuming it happens – since a rise in homebuilding will “spark even more jobs from construction workers to manufacturers and bring about a greater demand for housing overall.” Although housing demand is likely to rise in 2014 according to these economists, the housing price recovery is likely to slow in the coming year, said both Lawrence and Chen. Most analysts predict that housing prices will rise over the course of 2014 by about five percent, compared to this year’s 11 percent.
Of course, a great deal of this theoretical continued recovery hinges on the actual creation of those 2 million jobs. Most business economists surveyed by the National Association of Business Economists (NABE) are feeling just as sunny as Yun, responding that they predict that the economy will add about 200,000 jobs a month in the coming year (2.4 million total if that estimate holds). They also predict wage increases of about 2.4 percent for hourly-wage-earners in 2014, compared to a 1.8 percent increase in 2013. “Lower unemployment [will] put pressure on employers to spend more to recruit and keep the best workers,” said the NABE. Although consumer spending will likely remain modest in accord with modest wage gains, a gradual rise should, said the economists, “help keep the U.S. on a slow but steady path of recovery.” Ultimately, all of this should contribute, if predictions hold, to a similarly slow but steady housing recovery.
Of course, interest rate changes could change everything in 2014 if the Federal Reserve actually starts a serious taper of the existing economic stimulus program that currently involves spending billions of dollars a month on Treasuries and keeping mortgage interest rates artificially low. Given that most would-be homebuyers in today’s market consider five percent interest prohibitively high when it comes to making a home purchase using a conventional mortgage, even a small rise in interest rates could hurt the recovery. Yun predicted that rising interest rates in 2014 could slow the recovery but were unlikely to derail it despite “going above five percent by the second half of 2014.”
Finally, with distressed housing finally beginning to work its way through the market, the 2014 housing sector will have some real potential for lasting growth, said RealtyTrac vice president Daren Blomquist. He believes that “2014 will likely be the year we transition back to normal. He predicted that by the end of 2014, foreclosure filings will be down to about 85,000 a month nationwide. In 2005, there were an average of 73,750 foreclosure filings a month. This past November, there were 113,454 foreclosure filings on U.S. properties, a 37-percent decrease year-over-year.