Looking towards the future of the residential real estate market has been difficult for several years and it remains that way for 2014. Much of it has to do with the sluggish economy. Yes, the economy is improving but it is doing so at a slower rate than from previous recessions. Although the recession may have ended in mid 2009, a return to prosperity has been dismal if not nonexistent.
A study by over 250 nonprofit organizations produces what is known as the “Opportunity Score”. This is a broad measure of the economic mobility for common citizens. More specifically, the ability for the economically challenged to improve their economic status.
The opportunity score goes from 0 to 100 with 0 indicating a severe depression and 100 indicating strong prosperity for all. It has been stuck in the middle at 50 since 2011 when it was 49.59. In 2012, it was a flat 50 and today it is a meager 50.9. Among the 16 economic measures used to determine the score are medium household income, increases or decreases of poverty level incomes, and unemployment rate.
While the unemployment rate has fallen, the medium household income has also fallen along with more people surviving below the poverty level. Specific to residential real estate, affordable housing has increased. Meaning that fewer people are spending more than 30% of their monthly income on housing.The mixed numbers show that Americans, especially, those at lower incomes, continue to face an uphill struggle for economic prosperity.
Real Estate in 2014
The recession has turned into stagnation. The economy is not moving up. It is treading water at best and remains at danger to regress. At best, we can expect the economy to grow 1% or 2% in 2014. The minimum that is considered healthy is 3%.
People are sitting tight. Housing inventories will remain low in 2014. That will drive prices of available inventory up by about 6%. However, new construction will remain at a 50 year low. The overall effect will be sales that remain at 2013 levels.Federal oversight of Fannie Mae and Freddie Mac will continue. The result is they are not free to expand lending and will keep loan qualifications ultra tight.
The sluggish economy, tight housing inventory, and no change in the ability to qualify for a mortgage, results in the residential real estate industry only seeing monetary growth based on higher purchase prices but no growth in the volume of sales.
Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.