ORLANDO, FL - As 2013 comes to a close, it's been a good year for many Florida homeowners and homebuyers – thanks to low mortgage rates, high home affordability, strong home price growth, increasing home values and a steadily improving jobs market, according to economists at Florida Realtors' 2014 Real Estate and Economic Summit Tuesday in Orlando.
Look for 2014 to bring continued growth in the state's housing sector, said Florida Realtors Chief Economist John Tuccillo, though at a slower pace than in 2013 due to changing market and economic conditions.
"The real estate market is going to grow, and we'll probably see about a 10 percent increase in residential sales," Tuccillo said. "Home values will rise at roughly about five percent a year, which is in line with historical trends. In the last 18 months, home values have gone up about 12 percent – I don't think we'll see that next year."
In addition, Tuccillo said the commercial market will continue its modest recovery in 2014.
Freddie Mac Vice President and Chief Economist Dr. Frank Nothaft agreed with Tuccillo's assessment. He predicted U.S. home sales would grow about five to six percent in 2014, with home sales rising in Florida as well.
"The median time on the market for a Florida home is down to about a month and a half," Nothaft said. "We're seeing that in every single price point class. Clearly the market has improved substantially. And the amount of vacant housing oversupply (nationally) is the least in 10 years."
Nothaft dismissed fears that this year's rising home prices could signal another real estate "bubble" in the making, noting that the current increases are "off a really low price base" and prices remain well below their peak before the mortgage crisis.
"Prices are nowhere near where they were in 2006," Nothaft added. "Looking at national trends, about two years after that, on average, prices fell about 50 percent. A house worth $400,000 fell to about $200,000 in 2008. Even with the price gains we've seen since then, that house is worth about $250,000 now – so I don't see that as a bubble."
Mortgage rates will gradually rise in 2014 as the Federal Reserve discusses tapering back its bond-buying program, he said. "Mortgage rates have gone from dirt cheap to cheap and now I expect them to rise to low – maybe 5 to 5.5 percent toward the end of next year – still very low to where they've been historically," Nothaft pointed out.
Still, economists agreed that even slightly higher mortgage rates will put pressure on the housing market in 2014, as could uncertainty about employment and job growth, questions about the effects of the Affordable Health Care Act, confusion over Dodd-Frank banking regulations and a drop in the number of investors.
"Uncertainty has permeated this recovery, and that will continue," said Dr. Sean Snaith, director of the University of Central Florida (UCF) Institute for Economic Competitiveness. "Uncertainty over policy, particularly at the national level, is something that we'll have to grapple with into next year."
But in 2013, Florida began to take the lead in terms of job growth and housing's recovery, Snaith added – and the data continues to improve as the year comes to a close.
Nationally, total household wealth rose to $88.4 trillion in the second quarter of 2013, from $71.3 trillion in 2005, while net worth increased to $74.8 trillion from $59.1 trillion over the same period, he noted.
"In general, financial wealth has been recovered by households, and the stock market is back above its pre-Great Recession levels," Snaith said. "It's a good launch pad into 2014, and even beyond. I anticipate all the fundamental drivers of our economy are pointing upward."
Perhaps the biggest challenge facing the housing market in 2014 – in Florida and throughout the U.S. – will be restricted access to credit, according to Tuccillo.
"The key to this whole business is going to be financing accessibility," he said. "Finding your buyer financing is absolute gold in this market. Anyone who can help solve that problem is going to help the consumer."
Also speaking at the Florida Realtors summit was Dr. Grant Thrall, a former University of Florida (UF) professor and a leading figure in the practice of business geography and marketing. Realtor leaders from Panama City to South Florida attended the event, which also featured a live webcast to local Realtor associations across the state.