Prepare for a year of more in the real estate industry — more improvement, mostly, but also more expense as mortgage rates, prices and rents rise.
Analysts expect a solid 2014 here and nationally, after a year in which the battered housing market got on firmer footing. They predict home values will continue rising and expect to see more choices for home buyers as higher prices pull in more would-be sellers.
Moody's Analytics is forecasting an 8 percent rise in average home prices in the Baltimore region this year, compared with a 5.6 percent increase last year. Federal budget cuts weighed on the local housing market last year, but that weight should lift in the latter half of the year with the easing of sequestration, said Celia Chen, a housing economist at Moody's Analytics.
"We're expecting sturdy growth in house prices in the coming year that will be supported by a stronger economy and still reasonably priced housing," she said.
Chen and other analysts predict a slowdown in price increases for the country as a whole. She's forecasting about 5 percent growth, compared with 10 percent last year.
"There are still challenges, but I think all in all, we should have a pretty solid housing market in 2014," said Keith T. Gumbinger, a vice president at mortgage information site HSH.com.
One of those challenges: Buyers shouldn't count on mortgage rates in the 4 percent range.
Rates for 30-year fixed-rate products were hovering around 4.5 percent at the start of the year, up from 3.3 percent a year earlier. Gumbinger and others think 5 percent or above is likely later this year, decreasing buying power — one of the reasons they expect a smaller increase in sale prices nationally.
The Federal Reserve decided in December to begin reducing its $85 billion a month bond-buying spree, which helped keep rates low. Subtracting $10 billion from those monthly purchases will add some pressure to mortgage rates, Gumbinger said. So will the healing economy.
But better economic news is also a housing-market plus.
"As the economy improves, people are more willing to make that big-ticket purchase such as a home," said Greg McBride, senior financial analyst at Bankrate.com. "We've had low mortgage rates for years, but when the economy stinks, nobody wants to buy a house."
Other factors that will likely influence — or be influenced by — housing this year:
Foreclosures: Fewer Marylanders are newly falling behind on their mortgages, but a lot of loans are very delinquent. Maryland's percent of loans in the foreclosure process was ninth highest in the country last summer, according to the most recent data from the Mortgage Bankers Association.
More of those homes could end up bank-owned and on the market this year.
Cheryl Hystad, executive director of Civil Justice in Baltimore, which helps people facing foreclosure, said mortgage servicers have a backlog of cases that stretches back several years. Servicers hit the brakes as the state increased foreclosure requirements during the mortgage crisis and the "robo-signing" paperwork scandal hit.
"The process really slowed almost to a trickle for a while," Hystad said.
Banks were also less than eager to put all their distressed homes on the market at once when prices were already falling. Now, with rising values, firms have a "greater incentive" to pick up the pace, McBride said.
Hystad encourages struggling Maryland borrowers to sign up for the state's foreclosure mediation process. People have been able to work out deals that keep them in their home in about 25 percent of the mediation cases Civil Justice and its network of attorneys have worked on, she said.
Renting: Tenants got a bit of a break last year, with median rents in the Baltimore metro area rising 1 percent after a few years of jumps in the 3 percent range, said Greg Willett, vice president of research for apartment market intelligence firm MPF Research. But he warns renters not to count on a repeat this year.
What held rents back was more apartments hitting the market — about 3,500 units last year, a sizable number for the area. Willett said the competition was focused at the higher end of the market, and apartment complexes in that category held rents steady later in the year to cope. Rents at lower and midprice complexes rose.