This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Zillow Sees Higher Home Prices, Easier Credit In 2014

Stocks in this article: Z XHB

NEW YORK (TheStreet) -- The housing recovery has been one of the bright spots in the economy this year, but it has also been frustrating for many.

Home prices have rebounded across markets, with year-over-year price gains in the double-digits for some of the hardest hit markets.

The rapid recovery helped free more than a million borrowers who were trapped with underwater mortgage loans.

But not everyone could participate in the housing rebound. Many buyers, particularly young first-time purchasers, were shut out of the market due to the lack of access to credit.

For other home buyers, there were simply not enough homes available for sale, and competition from cash-rich investors drove prices higher, squeezing them out of the market.

Online real estate company Zillow (Z) has released its predictions for 2014, and at least by some measures, the outlook appears bright.

Zillow expects home prices  to continue to rise but at a more moderate, sustainable pace. Prices are expected to rise nationwide by 3%, after rising about 5% in 2013.

(Note that Zillow's index of home prices, which does not include foreclosure re-sales, has generally shown a more modest appreciation than other widely-followed gauges such as the S&P/Case-Shiller 20-City Composite Index.)

Higher mortgage loan rates, more expensive home prices and greater supply from new construction and fewer underwater homeowners should put a check on home prices. "For buyers, this is welcome news, especially for those in markets where bidding wars were becoming the norm and bubble-like conditions were starting to emerge," says Zillow chief economist Stan Humphries.

Housing is definitely not going to be as affordable as it was say a year ago, with mortgage rates poised to hit 5% by the end of 2014, according to Zillow. The monthly payment on a $200,000 mortgage will rise by $160.

Rates are still low by historical standards, but with incomes remaining stagnant, affordability is starting to become an issue in certain markets, particularly in California.

On the flip side, it might be less difficult to get a loan in 2014 than it has been this year. "The silver lining to rising interest rates is that getting a loan will be easier," according to Erin Lantz, director of Zillow Mortgages. "Rising rates means lenders' refinance business will dwindle, forcing them to compete for buyers by potentially loosening their lending standards."

The broader outlook for homeownership, however, is still bleak. Zillow expects homeownership rates to fall below 65% for the first time since 1995. Zillow's Humphries believes that homeownership may remain at these levels for a while, as the previous peak of 69% was fostered by a bubble and was unsustainable.

Zillow also has a list of the hottest housing markets for 2014. "Markets determined to be 'hot' are characterized by lower than average unemployment, population growth of greater than 2 percent during the past two years and are forecasted to have home value growth of more than 2 percent during the next 12 months."

Salt Lake City, Seattle and Austin, Texas top the list.

-- Written by Shanthi Bharatwaj in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs