2014 Real Estate Market Forecast

Its that time again…time for my annual market forecast.  I like to consider March as the turn of the Real Estate year, as many folks begin to think about their real estate affairs this time of year.

Forecasting, to be honest, is just as much about reviewing the past as it is about predicting the future.  How can you know where you’re going if you don’t know where you’ve been?  With that said, its always a scary (albeit entertaining!) exercise for me to review last year’s forecast with what actually took place.

In short, 2013 was a two-faced trip around the sun for the Sacramento real estate market.  From January to June, I couldn’t have been more accurate with my projection of “steady price increases for sellers and challenging times for buyers”.  The market was ON FIRE with average home prices rising 21%, interest rates hitting rock bottom lows, and the number of homes for sale at the lowest point in over a decade.  However, after The Fed meeting on May 22^nd that quickly raised interest rates, the real estate market hit the brakes and my forecast accuracy fell off the tracks.  In the second half of the year, Sacramento home prices only increased 4%, and the number of homes for sale (known as “inventory”) nearly doubled. 

In hindsight, this second-half slow-down was healthy for the real estate market.  Things had become out of balance and the rally unsustainable.  Now looking forward to 2014, the big question will be are we going to see a resurgence in home prices as Spring nears or will it continue on its plodding pace?

My prediction is we’ll see stable 2014 home prices as both inventory and sold homes increase to remain mostly in balance with one another.  Despite the sharp increase in inventory in recent months, its still low at a level not seen since 2005 (see below).  More sellers will look to sell in 2014 as life events dictate homeowners to move.  Similarly, more buyers will look to buy in 2014 as folks re-enter the market after a prior short-sale or foreclosure.

In short, we should see a traditional market with a healthy balance between traditional buyers and sellers.  Short-sales and REOs will account for fewer than 15% of the market, real estate speculators will gravitate away from California, 30-year fixed rates will hover around 5%, and transactions will be dominated by repeat buyers.  In fact, I couldn’t agree more with Trulia’s Chief Economist who coined 2014 as “The Year of the Repeat Home Buyer.”  The Blue Waters Group is uniquely equipped to help clients buy, sell, and finance all at the same time.  Moving up or down can be an anxious experience, but our clients find having a single, trusted team handling all facets of their multiple transactions makes for a smoother, confident, and successful transaction.

Even a “normal” market requires just as much know-how, expertise, and calm nerves as any other market we’ve seen over the years.  If you or someone you know is considering a real estate transaction this year, I look forward to the opportunity to share my knowledge and experience.