After a big year for home price rebounds in 2013, homeowners are likely to see prices rise again in the coming year, says real estate analysis giant Zillow.
Nationally, home prices are expected to rise 3% on average, Zillow projects, with some markets leading the charge in terms of new, sustained demand for housing.
In addition to home prices rising, Zillow predicts mortgage rates will reach 5% by year-end 2014, It will be easier to get a mortgage in the coming year, and homeownership is likely to fall to its lowest level in close to 20 years.
While the home price increase is modest compared with the rebound seen in 2013, this could bode well for homebuyers.
“In 2013, home values rose rapidly – about 5% nationwide and more than 20% in some local markets,” said Zillow Chief Economist Stan Humphries. “These gains, while beneficial in many ways, were also unsustainable and well above historic norms for healthy, balanced markets.”
A slow down in gaining home values along with other factors including higher mortgage rates will create more opportunity for buyers and more normal conditions, he said.
“This year, home value gains will slow down significantly because of higher mortgage rates, more expensive home prices, and more supply created by fewer underwater homeowners and more new construction. For buyers, this is welcome news, especially for those in markets where bidding wars were becoming the norm and bubble-like conditions were starting to emerge.”
Among the top-10 hottest markets in 2014, Zillow projects Salt Lake City, Seattle, Austin, San Jose and Miami will see the highest demand in 2014, with Raleigh, Jacksonville, San Diego, Portland (Ore.) and Boston completing the list.
Rising rates will actually bode well for borrowers, Zillow’s director of mortgages, Erin Lantz said.
“The silver lining to rising interest rates is that getting a loan will be easier. Rising rates means lenders’ refinance business will dwindle, forcing them to compete for buyers by potentially loosening their lending standards.”
Written by Elizabeth Ecker