According to the National Association of Realtors (NAR), the dollar volume of home sales will rise modestly next year, but that growth will stem entirely from increased home prices, not the volume of sales.
This is being caused by tight underwriting by lenders, low inventories, and rising interest rates. Nationally the projections for 2014 sales volume are 5.14 million homes which is almost exactly what is expected for 2013. The growth in sales dollars will be driven by an expected 6 percent increase in prices. Lenders are keeping underwriting tight in part because of concern over the pending qualified mortgage and qualified residential mortgage rules, which are due to take effect next year.
Currently, community lenders are concerned about the new rules and how they will be implemented. They believe the new rules will put them at a competitive disadvantage with large banks. According the NAR, economic growth is likely to remain sluggish. The chief economist for NAR recently said he doesn’t see any signs of a return to recession, but neither does he see anything that would boost growth beyond the 1 to 2 percent that’s been the case during the recovery.
Economists consider a minimum healthy growth rate to be 3 percent.
What’s needed to spur stronger growth in the housing market is an increase in inventory through new construction. More homes will ease low inventories and slow home price increases which will help affordability. As we move into the New Year, hopefully there will be more clarity in the mortgage industry and we will see lenders looking to make loans to make up for the expected declines in refinances.
