2013 has come and gone, and we are now into 2014, just seven years removed from the worst housing crash in American history.
Since then, we’ve come a long way. Prices are up, foreclosures are down, and more people are able to buy and sell than in the past few years.
Will this recovery continue? Will real estate improve in 2014 – or take a slide backwards? And what does this all mean for property management?
We already predicted that the rental market will remain strong. Here is our best stab at gazing in a crystal ball for real estate as a whole next year.
One metric that everyone keeps an eye on is the median housing price.
Over the past couple of years, housing prices have trended up. For 2014, that trend should continue, albeit at a slower pace than we saw in 2013 (10.9% growth).
This isn’t out of the ordinary; the average median home price growth per year is somewhere around 4-6%. While we probably won’t see 10.9% next year, we also won’t see -18% growth like we did from 2008 to 2009. It’s all about perspective.
Inventory Should Remain Tight
In many parts of the country, inventory has become constrained because more buyers are interested in virtually the same number of properties that are for sale.
New home construction has also taken a hit over the past seven years, meaning the pool of potential properties has shrunk. Throw in underwater mortgages that still persist (in the millions) and you can see why it may be difficult to find a wealth of properties in some cities.
One positive takeaway: smaller investors who take the time to understand communities at the neighborhood level will find better opportunities than larger investors. Really understanding the market could be a tremendous boon for investors looking for great property management opportunities that will probably slip by the big boys.
Household Income Should Rise in 2014
Another development that may not seem immediately connected to real estate is household income.
For 2014, the U.S. government predicts that real disposable income will increase by 3.1% in 2014, up significantly from the 0.7% increase in 2013. What this means for real estate is clear: people will have more money to spend on housing, among other things, which means they’ll be tempted to upgrade their current rental or buy a home outright.
Property investors who work with property management companies to oversee their assets could be well-positioned to take advantage of a real estate market that, in many ways, will be better in 2014 than since over seven years ago.