US real estate market recovery to continue, but more slowly in 2014


A continued recovery in the US residential real estate market is widely forecast for 2014, albeit more slowly than in 2013. Most analysts agree home prices will continue to rise, but a slower, steadier pace. Compared with double digit price increases nationwide during 2013, most forecasts for 2014 are for national price increases ranging from 3% to 5%.

This is all good news for the US housing market. Many homeowners who were “under water” (the value of their home was less than the cost of their mortgage), are now in a position to sell. CoreLogic reports that nearly 3.5 million US homeowners moved out from under negative equity between the end of 2012 and mid-2013.

The timing is good as the Conference Board, a nonprofit a global, independent research association reports that US consumer confidence rebounded in December and the percentage of consumers who intend to buy a home in the next six months is the highest since 2000.

In a related projection, Moody’s Analytics expects the economy to expand enough in 2014 to enable young people to begin moving out of their parents’ home. This will give a boost to the rental market initially, but Moody’s predicts low vacancy rates and higher rents will prompt some renters to move on to homeownership.

The US commercial market recovery is also projected to gain momentum in 2014. Unlike the housing market, commercial recovery to date has been much slower than is typical following a recession. US GDP growth, while projected to be moderate, should be enough to stimulate demand for commercial space, particularly in light of little new supply coming onto the market in recent years.

In its Emerging Trends in Real Estate 2014 report, the Urban Land Institute forecasts the predicted growth will be in secondary markets, driven by investors looking for returns as opportunities in primary markets become harder to find and the best assets become more expensive. A similar scenario is forecast in Germany.

Investors in the US market who have traditionally looked to Boston, Chicago, New York City, Washington, DC, and San Francisco will expand their focuses. This trend is likely to build substantial momentum in 2014, says ULI, given the steady pace of improvement in market fundamentals in these secondary markets and also with more market investments meeting investors’ risk and return metrics.


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