Almost 45% of homeowners are “equity rich”

Soaring home prices continue to serve existing homeowners, with nearly 45% of all property owners now considered equity rich, a year-over-year jump that boosted 13% more homeowners into the prime position.

A homeowner is considered equity rich when they have at least 50% equity in their home, a feat more easily accomplished when skyrocketing home price appreciation widens the gap between what someone owes on their mortgage and the value of their house.

About 44.9% of mortgaged residential properties in the first quarter of 2022 had at least 50% equity in their property, according to ATTOM. The portion of mortgaged homes that were equity rich rose from 41.9% in the fourth quarter of 2021 and from 31.9% during the same period in 2021. 

“Homeowners continue to benefit from rising home prices,” Rick Sharga, executive vice president of market intelligence for ATTOM, said in a statement. “Record levels of home equity provide financial security for millions of families, and minimize the chance of another housing market crash like the one we saw in 2008. But these higher home prices and rising interest rates make it extremely challenging for first time buyers to enter the market.”

In the first quarter of 2022, just 3.2% of mortgaged homes, or one in 31, were considered seriously underwater – meaning the owner owed at least 25% more than the property’s estimated market value. While that figure is largely unchanged from the 3.1% of seriously underwater homes in the prior quarter, it was a marked improvement from 2021’s 4.7%, or one in 21 properties. 

The decade-long housing marketing boom, which continued from late 2021 into early 2022, largely has been attributed to the rise in home equity. But across the country, the median home price rose 2% during that period – to another record of $320,500, according to ATTOM. Market analysts say a glut of home buyers chasing a historically tight supply of properties also brought up prices even higher.

ATTOM expects the latest home equity trend to slow in the remaining months of this year. 

“It’s likely that equity will continue to grow through the rest of 2022, although home price increases should moderate as the year goes on,” Sharga said. “Rising interest rates, the highest inflation in 40 years, and the ongoing supply chain disruptions due to the war in Ukraine are likely to weaken demand and slow down home price appreciation.”

Nationwide, 45 states saw equity rich levels rise from the fourth quarter of 2021. However, at the same time, the percentage of mortgaged homes that were seriously underwater increased in 28 states. 

Idaho had the highest level of equity-rich properties with 68.8%, while Vermont (68%), Utah (63.6%) and Washington (60.9%) followed. Meanwhile, Mississippi ranked first for having the country’s biggest portion of mortgages seriously underwater at 17%. It was trailed by Louisiana (11.3%) and Wyoming (10%).

~ Connie Kim, Housing Wire

‘Frenzied housing market has ‘slim pickings’ in Puget Sound

Housing activity in the Puget Sound region remained “very active” last month even as more inventory hit the market, according to a new report from the Northwest Multiple Listing Services (NWMLS).

While a slight cool-down in the market was detected in the late summer with less homes going under contract, the activity has bounced back with the report showing that brokers added a total of 11,373 new listings for single-family homes and condominiums in September. 

However, inventory remains historically low in the competitive market with prices only projected to increase in the next year. NWMLS brokers reported a total of 7,757 active listings in September, slightly up from August’s high of 7,425 active listings but down 14.8% compared to the same time last year. Inventory for single-family homes in King County took a steep plummet in September, with total active listings down 32.5% from a year ago.

Across all 26 Washington counties surveyed in the report, there is only 0.75 months of inventory. The agency noted that it hasn’t seen more than a one month supply in inventory since July 2020, when it reached 1.04 months.”The housing market intensity for each new listing will continue its upward trajectory as the first of the year approaches,” said J. Lennox Scott, chairman and CEO of John L. Scott Real Estate, in a news release Wednesday.

With slim pickings in inventory and fierce competition, prices have continued to increase. In the past year, the median sales price increased by 14% — or $70,050 — across the 26 counties surveyed by the NWMLS.

And it’s not just King County and the surrounding areas that have experienced steep price increases: “outer suburban” areas along Interstate 5 are also seeing growth, with home prices in Kittitas County jumping by more than 26% compared to a year ago.

The report did note that the market for condominiums — which saw huge declines last year due to the COVID-19 pandemic and less people living in dense, urban areas — has stabilized, with an increase in both sales and prices. In King County, NWMLS showed a 20% jump in the number of condos that went under contract last month compared to a year ago, with median prices rising by 8% to $466,501.

Other nearby counties also saw huge increases in condo prices compared to a year ago: Kitsap jumped by 28.5%, Snohomish was up by 17.8% and Pierce County prices increased by 16.7%. Priced out of buying a single-family home, it is likely that more residential buyers are turning to condominiums, leading to a strong rebound in that market.

“We continue to see a migration of buyers to suburban markets which has resulted in significant year-over-year price growth in areas such as Shoreline, Lake Sammamish, Auburn, Skyway, Woodinville, and Burien,” said Matthew Gardner, chief economist at Windermere Real Estate. “It’s likely that buyers are drawn to these areas because housing is more affordable than in the urban neighborhoods closer to Seattle and Bellevue.”

Experts waned on whether the frenzy-level activity would continue into the winter and holiday season, which is typically slower.

“Buyers should consider staying in the market, if they can, as homeowners who are selling in the last quarter of the year tend to be highly motivated,” said John Deely, executive vice president of operations for Coldwell Banker Bain.

Callie Craighead, SeattlePI

Home Price Outlook for 2017

It doesn’t look like recent interest rate increases will cool the U.S. real estate market.

Nothing can chill the real estate sector in the U.S. like rising interest rates. So is the Federal Reserve’s expected move to boost borrowing costs likely to dent the housing market?

Don’t bet on it. Experts predict that housing prices will continue to rise in many markets around the country next year even as mortgage rates drift up. The Federal Open Market Committee — the panel at the central bank that sets monetary policy — will hold a two-day meeting next week, with most forecasters expecting 0.25 basis point increase in short-term rates. Market watchers expect the Fed to hike rates several times next year is the economy stays on its current course.

But that small initial increase, which would be the first upward tilt in rates since December of 2015, is unlikely to reduce demand for housing. Home prices have continued to rebound this year. The Federal Housing Finance Agency (FHFA) House Price Index posted a 6 percent gain in the third quarter on a year-over-year basis.

Economist Andres Carbacho-Burgos of Moody’s Analytics expects nationwide housing prices as measured by that index to rise an average of 4 percent in 2017. Steve Hovland of online real estate management firm HomeUnion projects a similar uptick, while noting that some markets that have seen have seen the sharpest price increases during the recovery, such as New York, Los Angeles and Austin, Texas, could see a dip.

Mortgage rates have already started to creep up as house hunters ponder the impact of an imminent Fed hike. “Since early November, you have had a significant jump in purchase mortgage applications,” Carbacho-Burgos said. “A lot of that has to do with the expectations effect. People think `Oh my God, interest rates are increasing and we better purchase now before mortgage interest rates go higher.’”

Despite that perception, borrowing costs remain exceptionally modest by historical standards, while the average mortgage payment around the U.S. is still significantly below its level before the housing crash, Capital Economics notes. The average 30-year fixed rate mortgage is 4.04 percent, up two basis points over the last week, the lowest level they have been since 2014. Rates last month were 3.51 percent. That compares with an average of 6.41 percent since 1990, according to the Mortgage Bankers Association.

“Buyers that have committed to a home purchase are unlikely to be swayed by the increase in interest rates,” Hovland said in a statement. “In fact, the change in the monthly mortgage obligation is approximately $65 for a median-priced home. The lower end of the market can absorb that increase. However, sellers are going to need to bear some of the cost of capital increase at the top of the market.”

Another support for the housing sector is the U.S. economy, which continues to see modest growth. Unemployment in November fell to 4.6 percent, its lowest level in more than a decade. Wage growth, which has been stagnant for years, has also ticked up this year.

“The employment picture has brightened considerably,” Bob Walters, chief economist with Quicken Loans, said. “There is a ton of pent-up demand over the last eight, nine years.”

Millennials, America’s largest generation, are also starting to enter the housing market and in 2017 will make up roughly 40 percent of first-time home buyers, according to Hovland.

Still, finding an affordable home in many markets remains a challenge because of a lack of inventory, according to realtors’ associations in those markets. For people buying their first homes, “It’s very difficult to find a product for them that they can afford,” said Lane McCormack, president of the Atlanta Board of Realtors, adding that starter homes in her area can fetch $300,000 to $400,000.

Christopher Zoller, chairman-elect of the Miami Association of Realtors, said sellers of homes priced between $300,000 and $600,000 are getting multiple offers while sellers of luxury properties are having difficulty attracting buyers. “We see some buyer reluctance at the high-price end and we see some seller intransigence,” he said.

Tight credit conditions are also making it hard some house hunters to get a mortgage. Although average down payments are not much higher these days than in the past, lenders require borrowers to have good credit.

By JONATHAN BERR MONEYWATCH

Market Update – January 2015

FSBO Millionaires Use Real Estate Agents

Do as I Say… not as I Do

This adage could be no truer today after it has been reported, in a recent Herald Tribune article, that when it came to selling his Florida mansion, Al Bennati, the longtime chief executive of BuyOwner.com, has chosen to list his home with a local real estate agent.

BuyOwner.com is one of many websites out there now that encourage home owners that they do not need to enlist the help of a professional agent to be able to sell their home. They go as far as to tell homeowners:

“BuyOwner.com allows you to reach the most potential buyers in the shortest amount of time, in the most effective (the Internet) and most cost effective manner (no commission!) possible.”

Let’s break down that statement:

Myth #1 – The internet is the most effective way to sell your home
Many have said that, with the introduction of home search on the internet, hiring an agent is no longer a necessity. When the time came to list his own home, Bennati went against his own advice saying:

“To sell a home of this magnitude, it needs to be done by a person and a company that reaches buyers of this caliber.”

Myth #2 – FSBO’ing is the most cost effective solution
Without proper exposure to the “right kind of buyers” your home will not sell. Many real estate professionals have elaborate strategies to get your listing in front of exactly who needs to see it.

The most recent Home Sellers’ and Buyers’ Profile Report from the National Association of Realtors revealed that, though 92% of buyers search for a home on the internet, 90% still use a real estate professional.

This isn’t the first time that a CEO of a major FSBO website has enlisted the help of an agent when the time came to sell their own home. In August of 2011 we reported on Colby Sambrotto of forsalebyowner.com who, after failing to sell his home using FSBO websites, needed an agent to sell his NYC apartment.

And, he got more money!!!!

Bottom Line
Two separate people made fortunes convincing others to sell their home through their FSBO sites. Yet, when it came to selling their own home, they recognized the value of using a real estate professional.

There is a reason the real estate industry has been around for centuries: it performs a valuable service.

~KCM Blog

7 Benefits of Home Ownership at Tax Time

The financial benefits of homeownership are evident year round, but particularly around tax time – they seem to jump off the page. Let’s examine how homeownership makes “cents” –  from the tax benefits, to good old fashioned financial stability.

1. Homeownership Builds Wealth Over Time

We were always taught growing up that owning a home is a financially savvy move. Our parents knew it, and their parents knew it. But this past decade of real estate turbulence has shaken everyone’s confidence in homeownership. That is why it’s so important that we discuss this again now that we’re in a ‘new market.’ Homeownership can be a very savvy financial move – but only if people buy homes they can actually afford. In 2014, this idea of sticking to a home you can afford to gradually build wealth is a “rule” that just happens to be new and old at the same time.

2. You Build Equity Every Month

Your equity in your home is the amount of money you can sell it for minus what you still owe on it. Every month you make a mortgage payment, and every month a portion of what you pay reduces the amount you owe.  That reduction of your mortgage every month increases your equity. That is especially true now with the elimination of risky mortgages like negative amortized and interest-only loans – thanks to the new “Qualified Mortgage” rules. The way mortgages work is that the principal portion of your payment increases slightly every month year after year. It’s lowest on your first payment and highest on your last payment. Thus, as the months and years go by, your equity grows!

3. You Reap Mortgage Tax Deduction Benefits

• Mortgage deduction: The tax code allows homeowners to deduct the mortgage interest from their tax obligations. For many people this is a huge deduction, since interest payments can be the largest component of your mortgage payment in the early years of owning a home.
• Some closing cost deductions: The first year you buy your home, you are able to claim the points (also called origination fees) on your loan, no matter whether they are paid by you or the seller. And because origination fees of 1 percent or more are common, the savings are considerable.
• Property tax is deductible: Real estate property taxes paid on your primary residence and a vacation home are fully deductible for income tax purposes.

4. Tax Deductions on Home Equity Lines

In addition to your mortgage interest, you can deduct the interest you pay on a home equity loan (or line of credit). This allows you to shift your credit card debts to your home equity loan, pay a lower interest rate than the horrendously exorbitant credit card interest rates, and get a deduction on the interest as well.

5. You Get a Capital Gains Exclusion

If you buy a home to live in as your primary residence for more than two years then you will qualify. When you sell, you can keep profits up to $250,000 if you are single, or $500,000 if you are married, and not owe any capital gains taxes. Now, it may sound ridiculous that your house could be worth more than when you purchased it after these past several years of falling house prices. However, if you purchased your home anytime prior to 2003, chances are it has appreciated in value and this tax benefit will come in very handy.

6. A Mortgage Is Like a Forced Savings Plan

Paying that mortgage every month and reducing the amount of your principal is like a forced savings plan. Each month you are building up more valuable equity in your home. In a sense, you are being forced to save—and that’s a good thing.

7. Long Term, Buying Is Cheaper than Renting

In the first few years, it may be cheaper to rent. But over time, as the interest portion of your mortgage payment decreases, the interest that you pay will eventually be lower than the rent you would have been paying. But more importantly, you are not throwing away all that money on rent. You gotta live someplace, so instead of paying off your landlord’s home or building, pay off your own!

~by Michael Corbett, Trulia.com

Moving-Up? Do it NOW not Later

A recent study revealed that the number of existing home owners planning to buy a home this year is about to increase dramatically. Some are moving up, some are downsizing and others are making a lateral move. Another study shows that over 75% of these buyers will, in fact, be in that first category: a move-up buyer. We want to address this group of buyers in today’s blog post.

There is no way for us to predict the future but we can look at what happened over the last year. Let’s look at buyers that considered moving up last year but decided to wait instead.

Assume they had a home worth $300,000 and were looking at a home for $400,000 (putting 10% down they would get a mortgage of $360,000). By waiting, their house appreciated by 13.8% over the last year (national average based on the Case Shiller Pricing Index). Their home would now be worth $341,400. But, the $400,000 home would now be worth $455,200 (requiring a mortgage of $409,680).

Here is a table showing what the additional monthly cost would be incurred by waiting:

                       

Prices are projected to appreciate by over 4% and interest rates are also expected to rise by as much as another full percentage point. If your family plans to move-up to a nicer or bigger home this year, it may make sense to move now rather than later.

~KCM Blog

 

2013 MLS Annual Review

Brokers report nearly $25.5 billion in 2013 sales

Members of Northwest Multiple Listing Service reported 75,517 closed sales during 2013, surpassing the 2012 volume by around 11,000 transactions for an increase of nearly 17 percent. Measured by dollars, last year’s sales of single family homes and condominiums were valued at nearly $25.5 billion to outgain the previous year by more than $5.5 billion (up 27.4 percent).

Last year’s completed sales included 65,122 single family homes and 10,395 condominiums, as tallied by nearly 21,000 real estate brokers in the 21 counties that make up the Northwest MLS service area.  The total units and dollar volume are the best since 2007 when members registered 82,197 sales valued at $32.3 billion.

The area-wide median price for last year’s sales was $270,000, improving on the previous year’s figure of $245,000 (up 10.2 percent). A comparison by county shows median sales prices ranged from $118,750 in Pacific County to $372,000 in King County.

Prices for single family homes (excluding condominiums) also rose 10.2 percent from 2012, increasing from $255,000 to $281,000. Condo prices jumped 15.3 percent, rising from the 2012 figure of $175,200 to last year’s median price of $202,000.

By one measure, buyers who shopped during 2013 had a bigger selection as members added more than 104,000 listings to inventory during the year. That was an improvement over 2012 when members added 91,359 new listings. However, brisk sales meant the total number of active listings, which averaged 21,946 during 2013, fell below the previous year’s average of 24,604.

During 2013, the area-wide supply, as measured by months of inventory, ranged from a low of 1.95 in March to 3.68 in December. Industry watchers tend to use a 4-to-6 month range as an indicator of a balanced market, favoring neither buyers nor sellers. Supply tended to be tightest in King and Snohomish counties.

Further evidence of a housing recovery is reflected in high-end sales. Northwest MLS members reported 1,621 sales of single family homes priced at $1 million or more, up 45.2 percent from the 2012 total of 1,116 such sales. Condos priced at $1 million and up accounted for another 137 sales, about the same number as 2012 (138 sales).

The highest-priced single family home that sold during 2013 by a member of Northwest MLS was a property in Medina that fetched $9.75 million. A penthouse in downtown Seattle that sold for $6.2 million topped the condo list.

Among other highlights in its annual compilation of statistics, Northwest Multiple Listing Service reported:

• Single family homes accounted for 86 percent of last year’s residential sales.
• Nearly half (49 percent) of last year’s single family home sales were 3-bedroom      homes. More than three-fourths (77 percent) of condos that sold had 2      bedrooms.
• The median price for a 3-bedroom home that sold in 2013 was $250,000. A      comparison by county shows the median price for this size home ranged from      $128,000 in Pacific County to $450,000 in San Juan County.
• Of the condo sales, about two-thirds (64.1 percent) were located in King      County. Within that county, the Eastside edged out Seattle for the largest share (39.7 percent versus 37 percent).
• Last year’s sales included 8,298 newly built single family homes that sold for a median price of $325,000, and 846 condos that sold for a median price of      $350,214.
• A 10-year comparison of median prices of single family homes shows prices      peaked in most counties in 2007. In 2013, Grant County selling prices returned to 2007 levels, Okanogan prices were at 96.7 percent of 2007 prices, and King County prices were at 91.2 percent of 2007 prices. Other counties have not yet reached those levels, but most are experiencing steady gains.
• Prices vary widely among school districts. An analysis of some of the largest      districts in the MLS market area shows single family homes on Mercer Island have the highest prices, followed by homes in the Bellevue, Issaquah, Lake Washington and Bainbridge school districts.

Number of houses on market in 3-county area edging back up

The number of homes for sale in the first half of 2014 will likely be higher, following one of the worst years in recent history

Here’s the good news: The number of homes for sale in the first half of 2014 will likely be higher, following one of the worst years in recent memory for inventory.

Real-estate analysts track the months’ supply of homes for sale by comparing the number of active listings with the number of pending sales — homes under contracts that have not yet closed. A balanced market is generally one with a four- to six-month supply of homes for sale.

This past March, the supply in all three counties hit its lowest level in at least a decade: one month in King, less than a month in Snohomish and 1.7 months in Pierce, according to data from the Northwest Multiple Listing Service.

Veteran real-estate agents said they’ve never seen anything like it.

“The first four months of this year were the best time to be a seller over the past decade,” said Ann Pierson, a John L. Scott broker in Bellevue. “Literally if anything was on the market it was going to sell.”

In Bellevue’s Somerset neighborhood, one of the region’s most sought-after for the local schools, Pierson said last March she’d have about 200 buyers come through on the first weekend she showed a house, with as many as eight bidders.

Early 2013 was the exact opposite of late 2008, which was a buyers’ market: The supply of homes and condominiums peaked at 10 months in King County and 11.3 months in Snohomish County, according to the MLS. Pierce County had an 11-month supply.

Since March’s record low, the supply of homes for sale in the Seattle metro area has steadily climbed.

Not coincidentally, the rate of bidding wars has plunged, according to data from Seattle-based Redfin, an online real-estate brokerage.

In November, about 43 percent of offers submitted by Redfin agents for home shoppers faced competition, down from 75 percent in April.

For the next five years, inventory should gradually grow, Pierson said.

The rebound in home prices has lifted thousands of homeowners out of negative equity, freeing them to sell their houses and wipe out mortgage debt. In King County, one of out six homes with a mortgage was in negative equity at the end of September, down from a peak of one in three in March 2012, according to Seattle-based Zillow, the online real-estate marketplace.

Also, new-home construction is edging back up. Through October, there were 7,560 permits for new single-family homes in the Seattle metro area. That’s up 9 percent from last year, though still well below the roughly 16,000 single-family units added annually before the housing bubble burst.

~by Sanjay Bhatt, Seattle Time

How 2014 Will be Different

Trulia’s Housing Predictions: How 2014 Will be Different

Next year looks to be the year of the repeat home buyer, as worsening affordability discourages first timers and investors; also, the buying process will be less frenzied. Hot markets to watch are primarily in the South, Plains, and Mountain states. Rental activity will swing back toward urban apartments, away from single-family homes.

The housing market continued its uneven recovery in 2013 and will enter 2014 closer to normal than it was a year earlier. Consumer optimism is climbing back: in Trulia’s latest survey, 74% of Americans said that homeownership was part of achieving their personal American Dream – the highest level since January 2010. Even among young adults (18-34 year olds), many of whom struggled through the recession and are still living with their parents, 73% said homeownership was part of achieving their personal American Dream, up from 65% in August 2011. Rising prices over the past two years have been great news for homeowners, especially for those who had been underwater, and the real estate industry has benefited from both higher prices and more sales volume.

At the same time, the effects of the recession and housing bust still sting: the barriers to homeownership remain high, and a few markets – mostly in Florida – still have a foreclosure overhang. Plus, the housing recovery itself brings its own challenges, including declining affordability and localized bubble worries, especially in southern California.

Barring any economic crises, the housing market should continue to normalize. Here are 5 ways that the 2014 housing market will be different from 2013:

1. Housing Affordability Worsens. Buying a home will be more expensive in 2014 than in 2013. Although home-price increases should slow from this year’s unsustainably fast pace (see #4, below), prices will still rise faster than both incomes and rents. Also, mortgage rates will be higher in 2014 than in 2013, thanks both to the strengthening economy (rates tend to rise in recoveries) and to Fed tapering, whenever it comes. The rising cost of homeownership will add insult to injury in America’s least affordable markets: in October 2013, for instance, 25% or less of the homes listed for sale in San Francisco, Orange County, Los Angeles, and New York were affordable to middle class households. Nonetheless, buying will remain cheaper than renting. As of September 2013, buying was 35% cheaper than renting nationally, and buying beat renting in all of the 100 largest metros. However, prices and mortgage rates might rise enough to tip the math in favor of renting in a couple of housing markets – starting with San Jose.
2. The Home-Buying Process Gets Less Frenzied. Home buyers in 2014 might kick themselves for not buying in 2013 or 2012, when mortgage rates and prices were lower, but they’ll take some comfort in the fact that the process won’t be as frenzied. There will be more inventory on the market next year, partly due to new construction, but primarily because higher prices will encourage more homeowners to sell – including those who are no longer underwater.  Also, buyers looking for a home for themselves will face less competition from investors who are scaling back their home purchases (see #3, below). Finally, mortgages should be easier to get because higher rates have slashed refinancing activity and pushed some banks to ramp up their purchase lending. Moreover, the new mortgage rules coming into effect in 2014 will give banks better clarity about the legal and financial risks they face with different types of mortgages, hopefully making them more willing to lend. All in all, more inventory, less competition from investors, and more mortgage credit should all make the buying process less frenzied than in 2013 – for those who can afford to buy.
3. Repeat Buyers Take Center Stage. 2013 was the year of the investor, but 2014 will be the year of the repeat home buyer. Investors buy less as prices rise: higher prices mean that the return on investment falls, and there’s less room for future price appreciation. Who will fill the gap? Not first-time buyers: saving for a down payment and having a stable job remain significant burdens, and declining affordability is also a big hurdle for first-timers. Who’s left? Repeat buyers: they’re less discouraged by rising prices than either investors or first-time buyers because the home they already own has also risen in value. Also, the down payment is less of a challenge for repeat buyers if they have equity in their current home
4. How Much Prices Slow Matters Less Than Why And Where. Prices won’t rise as much in 2014 as in 2013. The latest Trulia Price Monitor showed us that asking home prices rose year-over-year 12.1% nationally and more than 20% in 10 of the 100 largest metros. But it also revealed that these price gains are already slowing sharply in the hottest metros. How much prices slow matters less than why. If prices are slowing for the right reasons, great: growing inventory, fading investor activity, and rising mortgage rates are all natural price-slowing changes to expect at this stage of the recovery. But prices could slow for unhealthy reasons, too: if we have another government shutdown or more debt-ceiling brinksmanship, a drop in consumer confidence could hurt housing demand and home prices. Where prices change matters, too. Slowing prices are welcome news in overvalued or unaffordable markets, but markets where prices are significantly undervalued and borrowers are still underwater would be better off with a year or two of unsustainably fast price gains.
5. Rental Action Swings Back Toward Urban Apartments. Throughout the recession and recovery, investors bought homes and rented them out, sometimes to people who lost another (or the same!) home to foreclosure. In fact, the number of rented single-family homes leapt by 32% during this period. Going into 2014, though, investors are buying fewer single-family homes; loosening credit standards might allow more single-family renters to become owners again; and fewer owners are losing homes to foreclosures to begin with – all of which mean that the single-family rental market should cool. At the same time, multifamily accounts for an unusually high share of new construction, which means more urban apartment rentals should come onto the market in 2014. Urban apartments will be the first stop for many of the young adults who find jobs and move out of their parents’ homes. In short, 2014 should mean more supply and demand for urban apartment rentals, but slowing supply and demand for single-family rentals. Ironically, economic recovery means that the overall homeownership rate will probably decline, as some young adults form their own households as renters. Still, the shift in rental activity from suburban single-family to urban apartments would be yet another sign of housing recovery.

What other reasons will cause 2014 be different? New local markets will take the spotlight. Our top 10 markets to watch are entering 2014 with strong fundamentals, including recent job growth and longer-term economic success, as well as recent construction activity typical of vibrant markets. They are, in alphabetical order:

• Bethesda-Rockville-Frederick, MD
• Charlotte, NC-SC
• Denver, CO
• Fort Worth, TX
• Nashville, TN
• Oklahoma City, OK
• Raleigh, NC
• Salt Lake City, UT
• Seattle, WA
• Tulsa, OK

Why are so many of the high-profile markets of 2013 missing from our list? We ruled out markets that were more than a little overvalued according to our latest Bubble Watch, which eliminated most metros in Texas and coastal California. We also struck markets with a large foreclosure inventory (thanks for the data, RealtyTrac), like most of Florida. Our 10 markets to watch, therefore, should have strong activity in 2014 with few headwinds.

~ Jed Kolko, Chief Economist, Trulia