A rise in the number of listed properties: Abnormally
low inventory levels boosted prices throughout 2012 and part of 2013.
However, inventories are beginning to rise. The National Association of
Realtors reported that inventory levels of unsold homes rose in
September from a year earlier, the first rise in inventory since 2011.
The release of shadow inventory: In
areas where foreclosures were the highest, like Nevada, California and
Florida, banks are now beginning to release more of their foreclosures
after holding them back for years in order to stabilize prices.
Lower-priced foreclosures, especially on homes built between 2001 and
2008, offer a much cheaper alternative to buyers than new homes, even
after factoring in the cost for repairs and cosmetic improvements to the
home.
Weak job creation: Unemployment
is still high at 7.3%, and many of the average monthly jobs being
created recently are merely part-time or service industry jobs with low
wages that are not conducive to growing home ownership. In fact, home ownership rates have continued to decline in recent months. Some younger
consumers are also shunning home ownership, and are inclined to view
renting as a more flexible and favorable life style. Newer apartment
complexes often cater to these consumers whims with in-ground pools,
fitness rooms, bike trails, etc. People pay more to have these benefits,
but seem unwilling to trade them for the lawn mower and backyard
barbecue lifestyle of home ownership.
Rising interest rates: The
decline in housing stocks over the second half of 2013 is directly
attributable to talk of the Fed Tapering its monthly purchases of bonds,
and the resultant rise in interest rates that it produced. While no set
decision has been reached regarding how and when the Fed will begin to
taper off on its purchases, it would cause a sharp rise in interest
rates in 2014. The one-two combination of rising rates and home prices
could land a knock-out punch to home builder stocks.
Healthcare costs: With
the shaky roll out of the Affordable Care Act, there is a great deal of
uncertainty among consumers as to how much they will have to pay for
health insurance and medical costs. As young consumers in the 27 to 39
year old age group begin to pay more for health care, it will reduce the
amount of money available to them to save for housing related down
payments and closing costs. This, more than any of the other factors
mentioned, could put a serious crimp into home sales in 2014.
