Expect rising rates, home prices to lead to flat sales

by Ryan Smith12 Nov 2013

A top economist on Friday painted a grim picture of flat home sales and spiking prices and mortgage rates by the end of next year.

Lawrence Yun, chief economist for the National Association of Realtors, predicted that home prices would rise by 6%, existing home sales would remain flat and interest rates would jump to 5.4% by the end of 2014, the Wall Street Journal reported.

Speaking at the NAR’s annual conference in San Francisco, Yun said he expected interest rates on 30-year fixed-rate mortgages to jump “due to the anticipation that the Fed will start to raise rates in 2015. Tapering (of the Fed’s bond-buying program) also will have already taken place throughout 2014.”

Yun’s prediction’s weren’t entirely gloom and doom, however. He said he expected sales of new homes to jump by 18.5% next year and a 25% increase in new home construction starts from 2013’s pace of about 600,000 single-family units, the Journal reported. That’s good news; building has plummeted in recent years as smaller builders have been unable to get financing for new development, according to the Journal.

”Housing starts really need to ramp up going into next year,” Yun said. “Otherwise, home prices will continue to go up. … The only way to contain prices is that we need more inventory.”


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