In 2013, areas of California and throughout the nation experienced rapid home value increases, many of which were double digit jumps. The national average of appreciation in home values last year was more than 11 percent, but this year will likely see much more modest gains of about 4 to 4.5 percent, according to the most recent Kiplinger Letter forecast.
“Building will get a bump this year with just over 1 million new houses started in 2014, the first time starts have passed the 1 million mark since 2007,” Kiplinger Letter’s Associate Editor Gillian White said. “Sales of new homes will also be a bright spot, with 16 percent growth this year, just shy of 2013’s substantial performance.”
The Kiplinger Letter also predicts that both existing home sales and new home starts will accelerate again in 2014 to offset the high demand for real estate in many areas throughout the nation. New home starts are expected to increase by 15 percent in 2014, which will help to suppress the rapid rise in home values.
Take for example Santa Barbara homes for sale, which saw a major uptick in value in the latter part of 2013, according to Altos Research, a California-based real estate analytics company. The median single family home value increased from just less than $2 million in October to $2,627,231 as of February 21. During this same time, the supply of homes for sale in Santa Barbara fell from around 385 to 285.
However, despite the decreasing inventory and rising home prices, the market is in favor of buyers. In cases where markets become overly hot, the price appreciation that took place may reverse, like during the housing bubble burst. When home values get too steep due to a strong seller’s market, potential home buyers decide to wait on the sidelines to see if prices will dip back down to affordable levels.
“More moderate growth this year is not necessarily bad news, it signals a more sustainable, long-term growth trajectory that will help quell fears that another bubble is arising,” White continued. “Rising (mortgage) rates will also be helpful in some cases, cooling overly hot markets, where cheap rates and high demand sparked outsized price spikes.”
What to Expect in 2014
Mortgage rates will help to cool down demand in many areas of the country, and with new home construction up, the supply of inventory will be a little better. However, home builders are struggling with finding appropriate labor workers to complete jobs, which will hold back construction a bit. Some economists believe that this will also help keep the real estate market sustainable throughout the coming years.
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(all data current as of 10/22/2017)
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