3 Key Concerns That Could Impact The Real Estate Forecast For 2014

Yesterday's article showing the link between population growth and home sales raised a few questions from readers who were seeking a real estate forecast for 2014.

Primarily, I was asked what I expected to happen this year in the Tallahassee real estate market, and whether or not there was anything that might cause the market to change direction in the foreseeable future.

Positive Real Estate Forecast For 2014

First of all, all signs point to continued growth for the Tallahassee housing market. When we look at closed home sales over the long haul, short term trends are moving to higher ground. The one year trend for home sales is accelerating nicely and has crossed over the five year trend. Most recent months have performed at levels higher than the five year trend, so we believe both the one year trend and the five year trend will continue to rise.

real estate forecast for 2014

The real estate graph above clearly shows that the activity in the Tallahassee real estate market over the past five years was lower than what was recorded in the 1990s. When we combine this information from what we identified in yesterday's report on population growth in Tallahassee, it becomes very clear that the number of home sales in Tallahassee must rise.

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3 Key Housing Market Concerns

Referring back to the beginning of this post, readers were curious about any factors that could change current real estate market trends to move in a negative direction.

The short answer is no, I am not overly concerned about the possibility of the market changing directions in 2014.

But it could. In fact, there are 3 things we will monitor this year that could impact our real estate forecast for 2014:

  1. Rising mortgage interest rates - The average interest rate for a home loan over the past 50 years is 8.55%. If mortgage interest rates were to move back to that average this year (or even halfway back), it would send a shock wave to the market and home values and home sales would plummet for quite some time. While I do do expect rates to rise, I do not expect a significant increase.
  2. Shadow inventory activity could explode - By my count, there are over 7,000 homes that need to be sold that are not currently on the market. Considering just 4,100 home sales were recorded in Leon County last year, a rush to the market by the shadow inventory (pent-up-supply) could throw supply and demand out of balance again, causing home values to decline. Thus far, I have been pleasantly surprised at the rate at which these homes have streamed back into the market and in fact we are dealing with a balanced market for most price ranges below $500,000.
  3. Home builders could jump the gun - The new construction market has been pulverized over the past 7 years, and builders and their subcontractors want to get back to work. We will see more new construction in 2014 than we have for any of the past few years, but hopefully builders will keep a keen eye on the supply side and not rush back into the market too strongly, too soon.

The housing recovery is established well enough by now that we can handle some movement in all three key factors and still have a positive year. It is only extreme changes that could move our forecast to negative.

If you would like to know more about what our real estate forecast for 2014 means for you and your housing goals, just drop me a note and we can schedule a time to discuss your situation and the opportunities for you in the Tallahassee real estate market.

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