Home sales will hold steady next year, but prices will continue to rise due to a low supply of homes for sale, the National Association of Realtors predicts.
Flattening home sales will mark a sharp reversal from the past two years in which existing home sales increased from the year before.
But the lack of income growth, higher home prices and rising interest rates will weigh on sales, says Lawrence Yun, the trade group’s chief economist, speaking at the NAR annual conference here Friday.
Median home prices, currently about $200,000 for the U.S., will rise 6% next year after an 11% gain this year, Yun says.
The existing home inventory is now near a 13-year low.
“The inventory shortage will not go away,” Yun says, noting that new home construction is still far from historic levels.
While rising home prices will entice more people to sell homes, many of those people will also buy homes, Yun says. New home construction is what’s needed to expand inventories.
Markets with stronger job growth will do better next year that those without. Some of the best-performing housing markets next year will likely include Salt Lake City, Houston, Denver, Seattle, Tampa and Atlanta, Yun says.
Coastal California markets are likely to continue to experience inventory shortages given good job growth in many of those markets and little new home building.
Home sales could get a boost next year if lenders loosen home loan-lending standards. That would expand the pool of potential home buyers.
Lenders may do that given a dropoff in refinance demand. Refinance volume will fall next year to a 15-year low, Yun says. That’s largely because interest rates have been below 6% for five years and there are not many people with mortgages left to refinance.
By the end of 2014, NAR forecasts the average 30-year fixed mortgage rate will hit 5.4%. Rates will rise as the Federal Reserve pulls back on the stimulus measures it has used since 2008 to keep rates low and stimulate the economy.