The two graphs below show the year-to-date sales for the entire Louisville area, including the surrounding counties of Bullitt, Oldham, Henry, Trimble, Shelby and Spencer. The sales include single family homes as well as condos and farms.
As you will note, there were 1,680 more properties sold in 2013 over 2012, and the average sale price increased from $174,159 in 2012 to $181,990 in 2013.
The graph is broken down by area. I find it interesting that the average sales price “Area 20”, for instance (Oldham County north of I-71) went virtually unchanged, while “Area 9” in Louisville (east end, including the Brownsboro Road/Westport Road corridor), showed a $27,000 increase. This is due, in large part, to the increase in new home construction.
Some 2014 Predictions From The Experts:
Home Prices Will Rise
Online real estate database Zillow predicts that home prices will rise between 3% and 5% in 2014. For comparison’s sake, 2013 saw jumps of 5% nationally, with increases of more than 20% in some hot spots. “These gains, while beneficial in many ways, were also unsustainable and well above historic norms for healthy, balanced markets,” says Dr. Stan Humphries, Zillow’s chief economist. “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.”
Interest Rates Will Also Rise
Most experts are saying that interest rates will rise by the end of 2014. Zillow predicts rates will hit 5% by the end of 2014–well up from the 4′s and 3′s of late, but still well within normal levels. New Fed Reserve chief Janet Yellen is expected to continue Ben Bernake’s policy of keeping mortgage rates low by buying blocks of mortgage-backed securities, but the Fed’s bond-buying taper could push rates higher. “While this will make homes more expensive to finance – the monthly payment on a $200,000 loan will rise by roughly $160 – it’s important to remember that mortgage rates in the 5 percent range are still very low,” says Erin Lantz, Zillow’s director of mortgages.
Mortgages Will Be Easier To Get
“The silver lining to rising interest rates is that getting a loan will be easier,” says Lantz. “Rising rates means lenders’ refinance business will dwindle, forcing them to compete for buyers by potentially loosening their lending standards.”
Inventory Will Increase
Realtor.com notes that the inventory (homes available for purchase) will increase. Builders are building again, and with the increase in new homes there will also be an increase in existing homes in 2014. The result will be a return to traditional levels of housing inventory.
Fewer Homeowners Will Be Underwater
Rising prices helped 2.5 million homeowners with underwater mortgages regain positive equity status during the second quarter of 2013, according to Realtor.com. A CoreLogic report found that about 6.4 million homes were still a negative equity situation at the end of 4th quarter 2013. The experts are expecting that number to shrink in 2014.
Affordability Will Decline
Home affordability will decline as a result of mortgage rates going up and income levels that aren’t keeping up with increasing housing costs. In 2013, the National Association of Realtors’ Home Affordability Index dropped to a five-year low. Experts predict that trend will continue in 2014.
Ownership Will Decline
In 2014, Zillow predicts, homeownership rates will fall below 65 percent for the first time since 1995. “The housing bubble was fueled by easy lending standards and irrational expectations of home value appreciation, but it put a historically high number of American households – seven out of ten – in a home, if only temporarily,” says Humphries. “That homeownership level proved unsustainable and during the housing recession and recovery the homeownership rate has floated back down to a more normal level, and we expect it to break 65% for the first time since the mid-1990s.” Watch also for adult children to move out of their parents’ homes, starting their own households and further decreasing the overall homeownership rate.
More Americans Will Be Downsizing
Americans are moving. But today’s buyer is no longer stretching on tiptoes to buy as much as his lender allows. He is concentrating on affordability. Instead of moving up to larger homes, the trend is leaning toward smaller, more affordable homes. And for those who are relocating and given a choice, they are looking for more affordable areas of the country.
Foreclosures Will Fade
The once booming foreclosure market has slowed, with September 2013 the 36th straight month of year-over-year decreases in foreclosure activity, nearly 33% down from the end of 2012. The declines should continue with the overall housing recovery.
This Louisville Realtor is happy to report that the real estate market is improving, albeit slowing and cautiously. And since real estate drives the rest of the economy, this, as Martha Stewart would say, “is a very good thing.”
For more information on housing trends for your particular area, please send me a comment or contact me directly.