By Mark Fleming
The housing market, had a wonderful year in 2013. The pace of home sales increased, distressed sales declined, foreclosures fell, negative equity began to subside and prices rose an impressive 11 percent. So looking ahead to 2014, how can I top such a good year? I’ve come up with two resolutions to keep this momentum going in the New Year:
Resolution One: I resolve to be more inclusive in 2014. Next year, I will spread the wealth, feel the love and embrace the diaspora that is housing demand. First-time homebuyers and resellers should increase their respective shares of sales. Don’t get me wrong –investors with cash made a needed and valuable contribution in 2012 and 2013, but now it’s time for more traditional sources of housing demand. This won’t be an easy task. First-time homebuyers will be challenged economically. Higher unemployment rates for the young generation, student debt and a lack of down payment are all going to challenge a first-time homebuyer’s ability to finance a home. Existing homeowners, while in a much better equity position than a year ago, still remain under-equited in high numbers. An increasingly inclusive market that includes more first-time homebuyers and existing homeowners wishing to upgrade will require access to well-priced, low-down-payment mortgages. Luckily, the soon-to-be-implemented QM regulations don’t stipulate minimum down payments, so I am hopeful that mortgage markets will provide QM-eligible mortgages with low down payments in 2014 in support of a more inclusive housing market.
Resolution Two: I’m proud of my performance in 2013 (hey, I outperformed the overall economy by a long shot!), but I can’t realistically hope for such a high level of price appreciation to continue in 2014. It’s just plain unsustainable. Of the 50 largest markets in the U.S., only six are currently overvalued: Austin, Texas; Houston, Miami, New York, San Antonio and Washington, D.C. Even with the strong appreciation I experienced in 2013, overall prices are still undervalued by about 2 percent. That means all the gains made have addressed the over-correction in most of my markets over the last few years, but overvaluation will quickly happen across the country if prices continue to grow substantially faster than income. How does Aesop’s fable go again? The tortoise wins the race in the end, slow and steady. That’s my resolution for the year ahead.
As we all know, New Year’s resolutions are a tricky business. We resolve to get organized, spend less, eat better or exercise more. Yet, more than half of those who make a resolution give it up within six months, so the odds are against me. Nonetheless, if I can stick to these two resolutions, I will be a happier and healthier housing market in 2014. That’s something that will benefit everyone.