Jed Kolko likes to talk about real estate data, dishing out some answers to our questions to wrap up March 2014. As Chief Economist and Vice President of Analytics for Trulia, the all-in-one real estate site that helps buyers and sellers figure out the market, he conducts a mashup of the big data and serves it up in bite-size pieces.
As 2014’s first quarter drew to a close, Trulia‘s Chief Economist Jed Kolko offered some exclusive insight into the national housing scene: where we’ve been, where we are and where we’re headed. Dr. Kolko translates vast amounts of real estate and economic data into succinct take-aways, highly useful for home buyers, sellers and renters.
Tracking the health of the housing market each quarter, Dr. Kolko releases the Trulia Housing Barometer, a gauge on how to interpret what’s going on in the market. It looks at five key indicators: home prices, home sales, new construction starts, young adult employment and delinquency and foreclosure rates. He also mixes economic reports with a bit of fun, giving Americans a look into how we feel about our neighbors, about real estate agents and about the challenges of home ownership, which in early 2014 meant shoveling snow from the driveway.
Where we’ve been
The good news, according to Dr. Kolko, is that, “We’re definitely coming out” of the housing recession. “We’re most of the way back to normal,” he added. Trulia considers that factors including prices, sales, delinquency, vacancy and the share of people no longer under water support this finding. The housing recovery advanced unevenly in 2013, with stronger numbers for key indicators in sales and prices moving ahead more strongly than employment and new construction.
What are the national trends
Trulia’s summary of what $1 million could buy in Manhattan, Kansas versus midtown Manhattan confirms the significance of location to any discussion of U.S. housing. It points out that a typical million-dollar home in San Francisco would fit four times into a million-dollar home in Toledo or Indianapolis. Nonetheless, Dr. Kolko identifies certain national trends that play out, significant for a look by anyone considering a change in their own housing status. Among these indicators are mortgage rates, rules and policies, housing and tax deduction policies and demographics of household creation from Millennials to baby boomers.
Where we are now
In painting the big picture, Dr. Kolko explains that 2014 takes a hit for purchasers, especially first-time buyers. Buying a house is “more expensive in 2014. Affordability is a bigger problem than it was last year.” While mortgage rates are still historically low, they’re inching up, as expected during a recovery. Meantime, wages have not kept pace with home prices. However, on the plus side for potential home purchasers, Dr. Kolko says, “There are more homes on the market than one year ago, including more new homes, and reduced competition from investors, creating less frenzy.” We can expect house prices to continue on an upward trend but not at the pace of 2013, which averaged out about 10 percent nationally.
Where we are going
The second quarter brings the curtain up on the seasonal house-buying period which peaks in the warmer months. Repeat buyers will represent those out in force this year, as they are more able to balance asking prices against their own increased home value. For first-time buyers, the challenges of saving for a deposit, qualifying for a mortgage and job security “make home ownership a bigger challenge,” says Dr. Kolko. “Credit is still tight.” Since rates are up, “We see that the banks’ refinancing demands fell off the cliff hugely.” With this diminished demand, banks could possibly look to expand their home-purchase lending, especially with the new mortgage rules which clarify risk. Therefore, credit could ease somewhat.
What kind of housing is coming to market
“Single-family home construction is way below normal levels, while apartment construction is booming, at a 15-year high,” Dr. Kolko mentions. Apartment rental is an essential first step for young people getting jobs and moving out of their parents’ homes. As they form households with other 20-somethings, we see a positive sign of economic recovery, with more supply and demand for urban apartment rentals. Dr. Kolko says this will be interesting to watch in the longer-term, since “At the moment the suburbs are still growing faster than the cities.”
Where the new lookers are
Followers of housing summaries are usually keen to know about city-by-city breakdowns. Trulia’s market watch on the 100 largest U.S. metros includes several that have expanded laterally, such as Bethesda-Rockville-Frederick, Maryland. That metropolitan area is cited as a top 10 to watch in 2014 for its “strong fundamentals, including recent job growth and longer-term economic success, as well as recent construction activity typical of vibrant markets,” indicates Trulia. Keep on eye on the beauty pageant top 10 finalists: Charlotte and Raleigh, Denver, Fort Worth, Nashville, Tulsa and Oklahoma City, Seattle and Salt Lake City. What’s missing? Typical headliners in coastal California and in Texas that are considered overvalued, plus Florida with its large foreclosure inventory.
Laurie Joe Miller Farr is a freelance writer covering all things in her adopted San Francisco. A dedicated urbanite, she’s a transplanted New Yorker by way of a couple of decades in London as a hotel sales and marketing manager. Follow her work on @ReferencePlease, USA Today, Yahoo! and on Examiner.com.