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April 20, 2014

Kiplinger Predicts More Modest Housing Gains in 2014

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Kiplinger Predicts More Modest Housing Gains in 2014

The national average of appreciation in home values expected for this year is 4 percent to 4.5 percent compared with a gain of more than 11 percent in 2013, according to a recent Kiplinger Letter forecast. The slowdown in housing gains expected is due to rising mortgage rate expectations and fewer investors offering all-cash deals as bargain home prices fade away, the letter states. 

"More moderate growth this year is not necessarily bad news, it signals a more sustainable, long-term growth trajectory that will help quell fears that another bubble is arising," says Gillian White, Kiplinger Letter's associate editor. "Rising rates will also be helpful in some cases, cooling overly hot markets, where cheap rates and high demand sparked outsized price spikes." 

Kiplinger forecasters predict new housing starts will top just over 1 million in 2014 – the first time since 2007. Also, sales of new homes are expected to grow by 16 percent this year. What's more, the for-sale inventory of existing homes will rise as more home owners see equity again and show more willingness to sell. 

Also, while affordability is declining, it will still be better than historical standards of a median-price home costing 20 percent of household income, the Kiplinger letter notes. In 2013, it took 15 percent of income to buy an equivalent home. With mortgage rates expected to rise to 5 percent this year, Kiplinger forecasters predict it will cost the average household 17 percent of their income in 2014 to purchase a median-price home. 

Source: "Housing Gains Predicted for the Year," RISMedia (Feb. 23, 2014)

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