Orlando Home Prices Expected to See Slower Growth in 2014
Real estate experts have predicted that home values will continue to increase this year– at a significantly slower pace compared to 2013. The 28 percent jump in home prices last year looks like it is going to be a tough act to follow. Economists forecast a 4 to 6 percent increase for 2014.
The Chief Economist for Freddie Mac, Frank Nothaft, was one of the influential attendees that spoke at the annual Florida Realtors summit. He told the audience that he expects home values to grow at a more subdued pace compared to 2013.
This isn’t necessarily a bad real estate signal. The Florida housing market has a very positive outlook by all accounts for this year. Here are just some of the important specs for this year:
- Increased mortgage rates
- Stable home sales
- Higher average sales prices
(A few experts predict that the rate of homeownership will drop to a 20-year low in 2014)
The prices for single family households in metropolitan Orlando outperformed the Florida market average last year. In particular, several distressed Orlando markets made a big comeback. The median home price for Central Florida peaked out near 175,000 (28 percent higher than last year).
John Tuccillo – Florida Realtors Chief Economist – believes that Orlando home values will return to their historic level this year. They only need to increase by another 5 percent this year.
(Fun Fact: Orlando home prices dipped by half in 2007 following housing bubble burst.)
Reasons for Reduced Growth
University of Central Florida economics professor Sean Snaith suggested that uncertainty around unemployment and the Affordable Health Care Act could scare potential buyers away from taking on a mortgage. However, he does predict that Florida housing construction projects will be successful over the next few years.
Slim employment opportunity will have a significant impact on the performance of the real estate market this year. “People who want full-time jobs but can’t find them and have to work part time add to the underemployment rate of 13.5 percent. That’s a large share of the market that doesn’t have the resources to buy.” explains Nothaft.
Nationwide Housing Predictions for 2014
Florida is not the only market with reduced growth projected for this year. Average home values across the country have a deflated projected growth rate compared to last year. Zillow’s Chief Economist, Stan Humphries, predicts a 3 percent hike in average prices compared to 5 percent last year.
This economist also agrees with the prediction that homeownership will dip below 65 percent. Unrealistic home appreciation expectations combined with less strenuous lending standards has produced a level of homeownership that isn’t maintainable for the long run.
Homebuyers could find that getting a mortgage will be easier– except the rate will be higher. 30 year mortgage rates are expected to surpass 5 percent during 2014. Those rates ranged between 3 and 4 percent (half of the historic level) for most of last year.
As mortgage-refinance market continues to lose value this year, lenders will most likely get more aggressive when it comes to locking down first-time buyers in the home loan market. Rates are expected to continue their climb back to historic averages.