Housing Outlook, 2014: Home Prices Head Higher

HousingPrices
Home prices will rise in 2014, but at a slower, more steady pace compared with historical trends.

By: Pat Mertz Esswein
From: Kiplinger’s Personal Finance, January 2014
Full Article

The housing recovery has pushed up home prices nearly everywhere. Over the past year, home prices rose in 225 of the 276 cities tracked by Clear Capital, a provider of real estate data and analysis. (See how home prices are shifting in 276 metro areas.) Prices nationwide rose by 10.9%, pushing the median price for existing homes up by $30,000, to $215,000. For people who have waited to sell their home or refinance their mortgage, that’s good news.

SEE ALSO: The Outlook for Mortgages

Rising home prices in Seattle enabled Mike and Kristin Litke to refinance their first mortgage last summer and pay off a second mortgage that had an 8.2% interest rate. The Litkes, who bought their three-bedroom, 1.5-bath home for $512,500 in 2007 at the peak of Seattle’s housing market, had used the second mortgage to avoid paying private mortgage insurance. In 2010, just as home prices in the area hit a trough, they refinanced their first mortgage to a 30-year fixed rate of 4.375% but were stuck with the second mortgage because they didn’t have enough equity to do a “cash-out” refi.

This time, however, their home appraised for $521,000, allowing them to refinance into one 30-year, fixed-rate mortgage of $416,800 at 4.25%. They have reduced their monthly payment by $360, giving them some wiggle room in their budget and providing an infusion of college-savings funds for their kids: Stephen, 3½, and Stella, 10 months.

What’s Ahead

In 2013, a sense of urgency drove traditional buyers hoping to take advantage of still-affordable home prices and historically low mortgage rates. Buyers found selection limited, and were often forced into bidding wars with investors and other buyers who paid cash. Sellers reaped the rewards in terms of quick sales, often above the asking price. Almost half of the cities tracked by Clear Capital experienced double-digit increases in home prices, led by Las Vegas, with a gain of 32%. Such spikes reflected a continuing “correction to the overcorrection,” says Alex Villacorta, vice-president of research and analytics for Clear Capital. Buyers and investors rushed in to snap up homes with prices that had fallen too far. Homes continue to be affordable, despite recent run-ups—on average, prices are still 31.5% below their 2006 peak. The percentage of monthly family income consumed by a mortgage payment (assuming a mortgage rate of 4.1%) is just 15.6%, on average, compared with 23.5% in mid 2006. “Houses are very cheap,” says David Stiff, principal economist at CoreLogic, a property and mortgage data analytics company.

A $2 Million Pizza??

The Plano City Council is set to vote Monday on a $2 million economic incentive package to woo Pizza Hut from its current Addison headquarters location to a new facility to be developed in Plano.  The new development would be part of the Legacy business park in West Plano.

Pizza Hut Logo

Time for a move?

In my opinion, this is a great play by the city of Plano.  Plano has done an exceptional job of attracting corporate headquarters to its fair city, and this is another shining opportunity.  The Pizza Hut relocation comes complete with approximately 450 high paying jobs and will provide a boost to the Plano economy.

Even though the relocation distance from their current location on the Dallas North Tollway in Addison, the move to Plano should serve as a nice stimulus to property values in West Plano.  The additional jobs will create additional residential housing demand in the neighborhoods in close proximity to the Legacy Business Park.  The move will not happen immediately.  The current lease on the Pizza Hut headquarters expires in 2010, and Pizza Hut will have to ready its new facility before making the move.

Kudos to the city of Plano who in the past year has attracted approximately 20 companies and over 4,500 new jobs in the midst of the largest economic downturn our country has faced in many decades.  No recession in Plano – keep gowing!!

For more information on this story, please see the Dallas Business Journal article – Pizza Hut Incentives on Plano’s Agenda.