Twenty-thirteen was a banner year for home prices, which shot up in many areas, making sellers happy and buyers not so much. Housing economists now say prices will continue to rise in 2014, though at a more modest and sustainable pace.
Lawrence Yun, chief economist of the National Association of Realtors, said sales of existing homes increased 20 percent and prices gained 18 percent over the last two years, cumulatively.
Sales are expected to top out at 5.13 million in 2013 and, to use Yun's words, "hold fairly even at about 5.12 million in 2014."
The U.S. median-home price is expected to rise 11 to 12 percent for 2013, then moderate to a gain of 5.5 to 6 percent in 2014.
Read: What salary do you need to buy a home in 25 cities?
Sales volume is important because price appreciation tends to track that measure more closely than other factors with price gains historically accompanying higher sales figures, according to NAR spokesperson Walt Molony.
Neither results nor predictions are uniform throughout the U.S. In fact, the percent change in home prices during the one-year period which ended Sept. 30, 2013, ranged from highs of 19.2 percent and 12.2 percent in the Pacific and Mountain regions, respectively, to lows of 4.9 percent and 3.7 percent in the New England and Mid-Atlantic states, also respectively, according to data from the Federal Housing Finance Agency, the chief regulator of Fannie Mae and Freddie Mac.
These are 10 cities the NAR says are poised for a housing turnaround:
- Atlanta, Ga.
- Boise, Idaho
- Charlotte, N.C.
- Denver, Colo.
- Houston, Texas
- Naples, Fla.
- Salt Lake City, Utah
- Seattle, Wash.
- Tampa, Fla.
- Tucson, Ariz.
CoreLogic, a property information and analytics company in Irvine, Calif., also expects slower price appreciation in 2014 after more than 19 months of consecutive year-over-year increases.
CoreLogic CEO Anand Nallathambi said prices "continued their ascent" in September 2013, but the pace of appreciation slowed compared with earlier in the year.
"This deceleration is natural and should help keep market fundamentals in balance over the longer-term," Nallathambi said.
A decline in consumer optimism
A monthly Fannie Mae telephone survey of 1,000 U.S. adult homeowners and renters recently found consumers were less confident about housing.
Fannie Mae Chief Economist Doug Duncan says that shift isn't a serious problem for housing because the supply, or inventory of for-sale homes, continues to be tight in many areas, giving prices room to rise further.
"While this decline in consumer optimism may portend a slowing of the housing recovery, supply constraint data suggest that we are likely to see continued positive growth in home prices," Duncan says.
Construction of more brand-new homes could ease the constraint if builders step up production.
NAR expects housing starts to total 917,000 in 2013 and hit 1.13 million in 2014. Sales of those new-built homes are forecast to total 429,000 in 2013 and 508,000 in 2014.
Frank Nothaft, chief economist at Freddie Mac, expects housing construction to increase 20 to 25 percent in 2014, again helping to support higher home prices.
"Prices were up about 10-12 percent in 2013," Nothaft explains. "That's not going to be sustained into 2014, but we do think prices will continue to rise at a much more modest reasonable pace of about 5-6 percent."
Wildcards for housing
Still, there are always risks.
Leslie Appleton-Young, chief economist at the California Association of Realtors, said the "wildcards" for housing in 2014 include the federal government's fiscal, monetary and housing policies, the Federal Reserve's stance on interest rates, and the housing supply and inventory of for-sale homes.
Rob McAllister, a mortgage broker at West Seattle Mortgage in Seattle, points to a specific new federal regulation, known as the qualified mortgage, or QM, as a worrisome unknown. QM is a bundle of requirements that could make it more difficult for some prospective buyers to qualify for home-purchase financing in 2014.
"If you limit the buyers," McAllister says, "that's naturally going to put housing in a situation where it won't have any appreciation or it will be super limited."
The bottom line for buyers and sellers is to be well educated and hyper-aware of local market conditions. Whatever the national trends are, understanding local prices, sales, supply and demand factors can help you sell at top-dollar or buy at a discount in 2014.
More help from HSH.com
Home price recovery index: Which metros have improved the most, least?Have home prices in your area fully recovered from the declines suffered during the Great Recession, or are they still struggling to make it back to the peaks they reached before the crisis?
Metro area definitionsMetro area definitions for the 27 metropolitan areas in "The salary you must earn to buy a home in 27 metros"
How to turn your home into a short-term rental
First-time homebuyer's guide to open housesOpen houses are a great way for first-time homebuyers to get out into the market and see what homes are available and to meet Realtors.