2013 was a whirlwind year in the recovery of the housing market. Inventory dropped while sales and prices rose, buyers were in competition with many homes seeing multiple offers, and new construction boomed.
What does last year tell us about the future? Keep an eye on the following trends as we head into 2014.
With Dane County currently sitting at 4.3 months of inventory it’s evident that the inventory drop off we saw at the end of 2013 never fully caught up to pace of sales. What does this mean heading into 2014? Unless we see a massive shift in the number of homes on the market expect to see competition for highly desirable and correctly priced properties.
While our area did not see as many distressed properties as other regions of the country, we did see a number of foreclosures and short sales in recent years. However, the distressed inventory we did have is continuing to drop as we head into next year. At the current pace we expect to see this inventory continue to stabilize which is good news for the general market as this is likely to be reflected in median home prices.
Pricing is another area where Dane County was not hit with the same force in recent years as other regions of the country. In fact, median sales price in the area fell less than 10% from a high of $218,000 whereas other areas in the United States saw price drops over 25%. With low inventory, fewer distressed homes, and continued low interest rates expect home prices to continue to creep up over the next 12 months.
After dropping well into the 3% range during part of 2013, interest rates jumped to 4.75% before falling recently back to the lower 4% range. When and how fast we will see rates rise continues to be debated, but it is nearly certain that we will see some rise in rates during the coming year. The most recent analysis I saw placed an estimate at 5.4% by the end of 2014. Keep in mind that each 1% increase in rates is equivalent to a 10% decrease in purchase power. Those looking to buy in the coming years may want to take advantage of these lower rates before they fully recover.
While interest rates remain low we can expect buyers to be ready to move. With low inventory buyers who need to move, or are motivated to do so, will be ready to pounce before their desired home gets a competing offer or rates rise. While it’s unlikely we’ll see the pace of sales we saw in 2013, we can expect buyer demand to stay strong into 2014.
For more details on these 5 market trends, or to get the most recent advice to both buyers and sellers, take a look at our 3rd quarter edition of the Real Estate Market Source.