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!

[video] Trulia, Zillow Offer, Good News, Bad News for 2014 Housing

Stocks in this article: XHB ^DJI

NEW YORK (TheStreet) -- Housing experts are starting to publish their forecasts for 2014 and the outlook is mixed.

Online real estate company Trulia (TRLA) expects the housing market to continue to normalize. But the bad news is housing is going to be less affordable in 2014 than in 2013.

Home prices are expected to rise at a slower pace, but the gains in prices are still likely to outpace rent and incomes, according to Trulia chief economist Jed Kolko. Also mortgage rates are expected to be higher, with the Federal Reserve expected to taper its quantitative easing program.

"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," writes Kolko.

Still, buying is 35% cheaper than renting in the 100 largest metros, though in cities such as San Jose, prices and rates could rise high enough to tip the math in favor of renting.

On the plus side, the homebuying process might be less frenzied in 2014. That's because higher prices should encourage more homeowners to list their homes, including those who are no longer underwater. Home construction is also recovering. Plus, investors are scaling back their purchases, so there may be less competition from cash buyers.

Also, Trulia predicts looser credit as the refinancing volumes shrink and banks compete for mortgage purchase applications.

Still, first-time homebuyers are likely to remain largely locked out of the housing recovery, according to Kolko, with factors such as job security and saving enough for a downpayment still posing significant challenges.

Repeat homebuyers therefore will likey dominate purchases in 2014. Repeat buyers are "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."

How much will home prices actually gain? Zillow (Z) said last week that it forecasts a 3% rise in 2014. Trulia stops short of making an actual forecast but says price gains will be slower than last year. Kolko notes that it does not matter how much it slows. What matters is why prices are slowing and where the gains are slowing. Prices are likely to slow because of more inventory, higher mortgage rates and fading investor activity. However, if prices reverse direction due to other macroeconomic factors such as a drop in consumer confidence or another government shutdown, that would be worrisome.

Also, a slowdown in prices would be welcome news in unaffordable markets such as California, but would be bad news in hardest-hit markets where a
recovery in home prices would stimulate local economies.

1 of 2

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 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

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