Will Your Home's Value Go Up in 2014?

Many experts think the gains in home prices will cool off, but I'm not so sure.

Jan 26, 2014 at 1:44PM

Source: U.S. Army Corps of Engineers Europe District.

After an excellent 2013 with double-digit year-over-year housing price gains, many experts believe the rally in housing is about to slow down. While there are reasons to follow the herd, there are also a few scenarios that could produce the opposite result.

Let's take a look at the reasons for the pessimism surrounding housing in 2014 and a few scenarios that could produce another double-digit rally.

Why the experts are pessimistic
Higher rates and new lending laws are the two main reasons experts are expecting the rally to fade.

Interest rates spiked by around 1% during the second half of 2013, but they remain at low levels relative to recent history. Currently sitting at around 4.5%, the Mortgage Bankers Association expects rates to climb to around 5% by the second half of 2014. The fear is that this could cause a reduction in home purchases as mortgages become less affordable to average buyers.

As far as legal issues are concerned, the Qualified Mortgage rule went into effect on January 1. Simply put, the law sets tighter requirements for lenders in order to avoid potential lawsuits from borrowers who become unable to pay for their homes. 

There are requirements for a loan to be "qualifying," including stricter income requirements. The fear with these types of loans is that mortgage credit will begin to tighten, making it tougher for people to qualify for mortgages (think 2009 standards).

A few things that could cause the rally to continue
Investors (who have been a driving force) could start to overlook higher prices as rents rise and the higher home prices become more justified. Investors also deal in cash more than other types of buyers, and cash buyers really don't care how high mortgage rates are.


Factors like the Federal Reserve's taper and positive economic data point toward rising rates. However, there is always that chance the taper has a smaller effect than expected, and a month or two of poor economic data could cause the Fed to more aggressively hold rates down.

It's also likely the mortgage market will actually ease credit standards and make it easier (but not too easy) for homebuyers to get a mortgage. While the income requirements and requirements such as no interest-only payments are pretty firm, down payments can vary, and so can the minimal acceptable credit score. 

For instance, Wells Fargo and TD Bank are already offering non-FHA loan products with down payments as low as 5%, which have been very rare, if not nonexistent since the mortgage crisis. While a lot of Americans are taking measures to beef up their credit scores, having enough cash on hand for 20% down is not as common, especially for first-time buyers. 

Looser down payment requirements will greatly increase the number of people who would qualify for a mortgage, and as we learned in the pre-crisis years, the easier it is to get a house, the more demand there will be, and the higher home prices will go. All the new regulations should ensure that the increased availability of mortgages takes place in a more responsible manner.

The most likely scenario
While mortgage rates may really have nowhere to go but up over the next few years, as long as the rise is gradual and controlled, it really shouldn't put too much of a damper on demand. With inflation well in control, the Fed has no reason to encourage a rapid rise in rates anytime soon. 

Also, many markets across the U.S. are still not recovered from the crisis. Until homeownership and home prices reach historically high levels, increasing accessibility to home financing via low down payment loans will encourage buyers, particularly first-timers. While we may not see the double-digit percentage gains we did in 2013, a steady, robust rise in home prices is still quite possible for the foreseeable future.

Even bigger than housing
U.S. News & World Report says this "Will drive the U.S. economy." And Business Insider calls it "The growth force of our time." In a special report titled "America's $2.89 Trillion Super Weapon Revealed," you'll learn specific steps you can take to capitalize on this massive growth opportunity. But act now, because this is your shot to cash in before the fat cats on Wall Street beat you to the potentially life-changing profits. Click here now for instant access to this free report.

Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers