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East Bay real estate predictions for 2014

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After doing some serious research I have come up with a list of predictions for the 2014 real estate market.

As a courtesy to you the reader, I will not only predict but will back-up my predictions with explanations. Not every fortune teller would be as considerate.

Some of these predications will be specific, most will be generalizations, and all will be about real estate, mortgages, and homes.

Home Prices

Prediction:
After a year of skyrocketing prices gains, prices will normalize or stay flat for real estate in the region, especially for single family homes through the early part of 2014 and prices will increase about 5% throughout most of the region.

Why?
Prices have gone up because buyers are able to get mortgages again. It is a simple example of supply and demand coming into balance now that the distressed property phase is cycling out investors and speculators are priced out of this market. Homeowners who were underwater are no longer in jeopardy of having to sell their home for less than is owed and the elusive shadow market is just that.

The NATIONAL ASSOCIATION OF REALTORS® predicts the time this year ends, prices of existing homes will have risen 6 percent. Next year, prices are expected to rise an additional 5 percent or so and then another 5 percent in 2014.

Inventory

Prediction: Inventory will normalize and expand throughout the region. By 2014, home sales are expected to grow by about 14 percent. That’s significant.

Why:
A huge boost in consumer confidence is driving demand and is increasing as many believe that housing finally “hit bottom” this year and is on its way up. Inexpensive money, mortgages, and a freer lending environment is making it possible for consumers to believe they can purchase homes again and super consumers to want to move up.

In addition, the boomers are downsizing. This creates a market for existing higher end single family homes in coveted markets, and drives demand in walkable neighborhoods with smaller homes and duplexes being particularly in demand.

Mortgages

Prediction:
The ultra-low rates would stick around forever. The NATIONAL ASSOCIATION OF REALTORS® is forecasting 30 year rates to climb to 4.6 percent within a couple of years. So that’s one prediction that’s not so great.

Why:
The housing recovery foundation has been built on the Federal Reserve Bank’s keeping the lending rate at almost nil and their program of buying government bonds and mortgage backed securities in an effort spur consumer and lender confidence and normalize the real estate market. It will not last forever and as confidence in the economy and real estate returns there will be a tapering by the Fed to prevent inflation.

Distressed Property

Prediction:
The distressed property market will continue to dwindle meaning all those “great” deals available over the past few years will dry up in all but the most depressed areas. Unfortunately there may be more foreclosures than short-sales as the banks become less and less willing to wait to get their money.

Why:
Housing prices are up and fewer properties are worth less than is owed on them. Government intervention, programs and consumer outrage are making it more difficult for lenders to arbitrarily foreclose on homeowners in trouble so the distressed properties are in decline. The NAR projects that distressed sales will fall to about 25 percent of the market-share of sales this year. And by 2014, they’re expected to fall to about 8 percent.

Where to buy in the East Bay for investors

Prediction:
To buy and hold, Richmond, Oakland between the 880 and 580.

Why:
Prices are still very low and prices in the surrounding areas are increasing. With the influx of buyers from San Francisco and the Peninsula areas anywhere convenient to BART is going to pick up over the next year.

Where to buy in the East Bay for homeowners on a budget

Prediction:
Vallejo, Hercules, Pinole, Antioch, Pittsburgh anywhere BART convenient going North.

Why:
Newer nice houses, schools, amenities, it’s all in the North bedroom communities. Anywhere convenient to BART is going to be a winner this year.

Agree or agree to disagree? Let me know your thoughts, americafoy@gmail.com.

If you have any other questions, or want to share your story, please reply to this post, contact me via my website, my facebook page, or on Twitter @AmericaFoy.

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