For those who are looking for value in real estate, this year looks as if it’s shaping up to be a better balance between supply and demand than 2013. Last year’s low inventory and favorable mortgage interest rates caused home prices to rise more than many anticipated as buyers rushed in while homeowners waited out the price rise. This year, housing prices are expected to continue to swell, but by not as much as last year as more sellers are anticipated to enter into the market to take advantage of this past year’s growth in home equity.
According to Realtor.com, November 2013 median prices for listings showed an increase of 6.9 percent increase compared to the previous year, while the nation’s inventory of homes for sale increase 0.2 percent compared to a year ago. Fewer real estate investors are expected to look for property.
In the last few years, investors have bought distressed properties either through short sales or foreclosures. These bargains are getting harder to find. At least so far, it still looks like a sellers’ market since it will take time for market conditions to normalize. Your real estate strategy for 2014 depends on whether you are a buyer or a seller.
If you’re a buyer, be forewarned that for those with good credit the interest rate on a 30-year fixed mortgage is expected to rise from today’s 4.53 percent to more than 5 percent. Rates could go even higher depending on how quickly the Federal Reserve Banks tapers off its quantitative easing of the last five years.
It’s a good idea to be prequalified as much as possible with all of your documents in the possession of a lender. The time to check out your credit reports and audit your FICO score is in advance, not when your dream house comes available.
According to November 2013 data from software company Ellie Mae, the average FICO score on conventional home loans was 756, higher than historical scores. Work with a lender with a reputation as a fast closer who will get the property appraised and funded sooner rather than later.
Make a realistic offer. Don’t expect to low ball these days. Look at comparable homes in the neighborhood and get a solid sense as to what they are selling for. In some markets, bidding wars have resumed.
One key to finding good value in real estate is to look in cities where the prices are still low compared to growth potential. Forbes Magazine analyzed the country’s top 100 markets and came up with a list of the top ten places to buy real estate in 2014:
- Ft. Worth-Arlington, TX
- Dallas-Plano-Irving, TX
- Charlotte-Gastonia-Concord, NC-SC
- Nashville-Davidson-Murfreesboro-Franklin, TN
- Houston-Sugar Land-Baytown, TX
- Atlanta-Sandy Springs-Marietta, GA
- Oklahoma City, OK
- Orlando-Kissimmee, FL
- Las Vegas-Paradise, NV
- Boise City-Nampa, ID
You are in a better position to sell if you are not under pressure to sell. You can expect the value of your home to increase throughout the year if the sale is not rushed. You might even want to engage in some selective remodeling, not going overboard, but renovating with an eye on the market.
The most in demand areas for a home redo are the bathroom and kitchen. Now is a good time to finance remodeling with a home equity line of credit, because HELOCs are based on short-term interest rates that the Federal Reserve isn’t likely to raise substantially until next year.
For more information on the best mortgage rates, visit our mortgage page.