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It looks as though 2013, had two parts… At the beginning of the year, low housing inventory and interest rates promoted bidding wars. That in turn, escalated prices quickly. Then, mid year the bidding wars slowed down due to raised interest rates.

There are many speculations about the housing market in 2014 here are 5 things to watch for…

1. WILL INVENTORY RISE?

Prices go up when there is low inventory. Foreclosures are slowing and New construction hasn’t picked up. Traditional buyers aren’t listing as many homes. The consensus view is that price growth continues at a somewhat slower pace, but that consensus view could be wrong—for the third year in a row—if there aren’t more homes for sale.

2. WHERE IS THE HOME-CONSTRUCTION RECOVERY?

Some economists say new-home demand could remain muted because many move-up buyers don’t have enough equity to “trade up” to that new home. Key issues to watch here: What happens to household formation, and do builders begin to throttle back price gains in favor of selling more homes in 2014?

3. WHAT HAPPENS TO MORTGAGE CREDIT?

Even if it gets easier to get a loan—by no means a given—borrowing costs and fees could rise. Banks also face new mortgage regulations that could keep most of them cautious. Borrowers with more volatile or harder-to-document incomes, including the self-employed or those who make a lot of money on commissions, bonuses, or tips, could continue to face tough sledding.

4.  WHAT WILL INVESTORS DO WITH THEIR HOMES?

A handful of institutional investors have purchased tens of thousands of homes that are being rented out. Can owners perfect the expense management associated with maintaining and leasing tens of thousands of individual homes?

5.  WHEN DOES HOUSING HIT A TIPPING POINT ON AFFORDABILITY

On the one hand, rising prices are giving many homeowners equity in their homes again—an extremely positive development to the extent it means these borrowers are less at risk of foreclosure.
But price inflation is making housing less affordable. This will be a bigger problem if cash buyers retreat from the market in 2014 and/or if interest rates rise in a meaningful way.

Read full article BY NICK TIMIRAOS:  http://blogs.wsj.com/five-things/2014/01/07/5-things-to-watch-in-housing-in-2014/

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