According to the “2014 Housing Review” released by realtor.com , 2014 “demonstrated a steady buildup of housing momentum fueled by significant improvements in economic fundamentals, low mortgage rates and compressed inventory, and is expected to carry the market into 2015 gains.”
However, there are also factors that continue to hold back a recovery, including tight credit restrictions and a limited supply of homes for sale. Realtor.com is the official site of the National Association of Realtors that offers listings and essential real estate-related information to nearly 23 million consumers each month. Its “2014 Housing Review” includes the following Top 5 Real Estate Trends that defined the 2014 housing market, with five indications of growth and five limiting factors. Indicators of a stronger housing recovery 1. Improving economic fundamentals: After an especially harsh winter, the economy picked up steam this spring and produced a banner year for new jobs. GDP this year was higher, resulting in stronger consumer confidence.
2. Historically low mortgage rates continued: Mortgage rates declined despite the end this year of quantitative easing, a monetary policy intended to stimulate the economy.
3. Return to normal price appreciation: After abnormally high levels of home price appreciation in 2012 and 2013, price increases moderated throughout 2014.
4. Decline of distressed sales: Foreclosures and short sales declined throughout the year, and while total home sales decreased year over year, non-distressed home sales increased over 2013.
5. End of the era of major investors active in purchases: The drop in distressed sales opportunities and higher home prices led to a decline of large-scale investor purchase activity in the single-family market sector, leaving more room for traditional first-time buyers.
Factors holding back recovery
1. Tight credit standards: Despite historically low rates, many households were prevented from capitalizing on mortgage access because of overlays lenders added to qualification standards in order to limit their risk.
2. Limited inventory: While absolute inventories increased, monthly supply of new homes and existing homes remained beneath normal levels.
3. Depressed levels of first-time buyers: The share of first-time buyers fell to the lowest level in more than 20 years.
4. Record levels of renters and ever-increasing rent prices: Continued declines in homeownership rates resulted in record numbers of renting households. Rent increases became an inflationary concern this year, and the pace of these increases is not slowing down.
5. Lack of recovery in homebuilding and low share of new home sales: Single-family starts barely increased in 2014 over 2013. New home sales remain far from normal share levels — typically near 16 percent, they are now around 9 percent. New home prices increased substantially again this year, limiting the demand.
All the above factors affected Silicon Valley in 2014, but don’t dampen the region’s housing market outlook. At a recent Silicon Valley Association of Realtors district meeting,
Moise Nahouraii, owner of Referral Realty in Cupertino, and the local trade association’s 2013 Realtor of the Year, shared his local forecast for 2015-2020. Nahouraii predicts employment will continue to grow through 2020; demand for homes will continue to be greater than supply; tight inventory and multiple offers will continue, especially in prime areas with good school districts; and appreciation will continue upwards of 5 to 10 percent, depending on the neighborhood.
Who will be the buyers? New hires, foreigners, families that want to move up, and families, mostly seniors, that wish to downsize, said Nahouraii.
Nahouraii explained the growth and expansion of high-tech companies like Apple, Google and Facebook will be phenomenal, but the market’s full recovery will hinge on the need for more housing, along with flexible and available financing.
“We are in the nucleus of everything that’s happening, and that means more people will be needing homes,” said Nahouraii.