More modest gains are likely this year, according to the
most recent Kiplinger Letter forecast. The national average of appreciation in
home values will be up 4 percent-4.5 percent, compared with a gain over 11
percent in 2013.
The top stated reason for this increase is rising mortgage
rates, will increase to 5 percent or so for 30-year fixed rate loans by the end
of the year. Another possible is that fewer investors are offering all-cash deals,
with bargain prices and.
The Kiplinger letter forecasts that new-home building will
accelerate again, helping to offset the construction drought of 2008-2012. Keep
an eye out for housing starts this year to climb by 15 percent and top 1
million for the first time since 2007. Sales of new homes are predicted to be a
bright spot.
Another prediction: More existing homes will go up for sale,
as price hikes pull homeowners out from mortgages that are underwater, making
them more willing to sell. Sales will climb by 4 percent, but inventory won’t
be as tight.
Affordability, though declining, is still better than the
historical norm: A median-price home costing 20 percent of household income. In
2013, it took just 15 percent of income to buy an equivalent home. When
mortgage rates rise to 5 percent, it will cost 17 percent of income.
More moderate growth this year is not necessarily bad news,
it signals a more sustainable, long-term growth trajectory that will help quell
fears that another bubble is arising.
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