According to Lawrence Yun, the National Association of Realtors' chief economist, home sales volume and prices are poised to keep improving over the next two years, outpacing growth in the broader economy. Watch for moderate inflation to appear starting in 2015, making it harder for today's renters to become home owners.
Economist Yun is forecasting 5.05 million nationally in home sales in 2013 and 5.3 million in 2014. By 2015, the national median home price is expected to have risen by 15 percent from today's level.
Contributing to the growth is the slowly improving economy, job creation and an increase in household formation after a hiatus during the downturn, Yun said.
Newly remediated Kapalua Golf Villas are priced from $675,000 to $995,000 fee simple. The villas are located on The Kapalua Bay Course’s tenth and 11th hole.
Rising rental rates are also contributing to the rise in home sales, as renters who are able to get financing in today's tight credit market find it makes more financial sense to buy while home prices remain relatively affordable.
But inflation could pose a problem starting two years down the road, Yun said. Although inflation has remained tame today - at about 2 percent per year - starting in 2015 it could jump to between 4 and 6 percent a year. That will be a short-term boon to home owners, as they enjoy an increase in price appreciation, but that would make home ownership harder for the growing number of renters today who aspire to buy. Not only would prices rise, but mortgage rates would go up as well.
The continuing federal deficit is a big reason inflation could jump in the future. But another cause might be the Federal Reserve buying mortgage-backed securities to help keep rates low. At some point soon, the Fed will have to start unwinding its position. When it does, interest rates and inflation will rise. Rental rates are expected to keep heading up.
As a result, although housing is expected to keep improving, this big question mark will hang over the real estate market and the broader economy over the next few years.
Mortgage interest rates have been on the rise for the past month. All-time record low interest rates were set just a few weeks ago.
"I do think that perhaps the all-time low interest rates are behind us," said Frank Nothaft, Freddie Mac's chief economist.
The record low for the 30-year fixed-rate averaged 3.31 percent in November, according to Freddie Mac's weekly mortgage market survey. For the week ending Jan. 31, Freddie Mac reported a national average of 3.53 percent for the 30-year fixed-rate mortgage.
If you have been sitting on the fence thinking housing prices and/or interest rates will be going lower, you may want to reconsider. All indicators point to decreasing inventory, rising prices and rising interest rates.
For information on the Maui market, please give me a call. Contact Laurie Lowson, R(B), ABR, CRB, CRS, ePro, RSPS, at Laurie@Lowson.com or (808) 276-8001.