As 2014 comes to a close, Power Brokers are pretty pleased. While specifics vary and hurdles still exist, most brokers report important progress this year, with home prices and overall volume heading in generally positive directions. The big question: What’s next for real estate? Will the market continue on its upward trajectory in 2015 or will outside influences—i.e., legislation, the economy, consumer confidence—further impede the real estate recovery’s momentum? In our end-of-the-year roundtable wrap-up, Power Brokers weigh in on what lies ahead for 2015.
Maria Patterson: Let me begin by asking all of you what you believe has been the most significant change to the real estate market so far in 2014.
Jeff Detwiler: I think the single biggest issue with the recovering housing market in 2014 is the mortgage component. The teeth of the Dodd-Frank Act went into place in 2014 and had a more significant impact this year than any year before. With thousands of pages of the Dodd-Frank Act, and regulations being interpreted differently, the lending industry took a step back and decided to originate to the lowest possible risk. But if everyone does that, so many quality borrowers are left out. This is impacting the first-time homebuyer segment and considerably slowing it down.
Tom Woiwode: I agree. Mortgage rules mandated by Dodd-Frank, although incrementally implemented prior to January 2014, saw their largest implementation this year. In my view, these rule changes represent a paradigm shift in the real estate, mortgage, and banking industry, with ripple effects to nearly every industry related to housing. Without regulatory changes to Dodd-Frank, I fear we are only seeing the tip of the iceberg. Secondly, homes in flood-prone areas now have an entirely new dimension to salability. Until long-term clarity and stability are provided for the National Flood Insurance Program, homes in coastal regions like ours will have the ball and chain of flood insurance uncertainty attached to them.
Rick Davidson: I believe the greatest change we’ve seen is increased activity in mergers and acquisitions in our industry and across several sectors: the brokerage business, the franchise business, the tech space and the real estate portal world. To me, consolidation speaks to a changing market environment and the need for businesses to be more effective in ensuring what they do for the consumer.
Jeff Sposito: In 2014, our region has been most impacted by a prolonged lack of inventory and an increase of sales prices.
D.B. Wilson: We have also been greatly affected by the lack of inventory this year. This is the lowest inventory we have had in close to 20 years.
Christy Budnick: The most significant change we’ve seen in our region this year is a stabilization of the market across our entire area, with steady price appreciation in every price range. In Northeast Florida, we haven’t seen the run-ups like in other areas of Florida. We’ve seen increases in the 3 – 5 percent range; we’re not seeing the 15 – 20 percent increases like they are in south Florida.
Sherry Chris: While it’s not a change in the way we do business, and while we believe it’s always been a key underpinning of real estate, in 2014, we have heard and seen more above-the-line discussions, insights and focus from the industry at large about serving the consumer. Brokers, brands and agents are all thinking about how to use social, tech and their own approaches to develop their skill set to meet these needs. All industry sectors are joining this quest. For example, tech discussions are not just about tech applications anymore; they’re about how the functionality helps brokers and agents help the end consumer.
MP: How do you expect your markets to fare next year, in terms of both home sales and home values?
Rick Davidson: At Realogy, we follow a combination of NAR and Fannie Mae data. NAR is calling for a double-digit increase in transaction volume, both in number of homes sold and in prices. Fannie Mae is also calling for an increase in number of homes sold and in price. In addition, NAR is calling for a larger increase in the number of homes sold and a smaller increase in pricing, as compared to Fannie, which is projecting both areas to show an increase in the 10 – 12 percent range.
Sherry Chris: Yes, none of us have a crystal ball, but NAR and Fannie Mae are both predicting an uptrend in 2015 with healthy underlying demand throughout the year.
Linda Sherrer: We anticipate seeing price appreciation in a consistent 3 – 5 percent range. We may also see folks who went through a short sale and were forced out of the marketplace able to come back into the market. A high percentage of this group desires to be homeowners again.
Jeff Detwiler: In the Midatlantic region, going into next year, we expect sales to be flat in comparison to 2014, and we expect prices, generally speaking, to continue showing appreciation, albeit at a much slower pace at first. There are some short-term hurdles, but we think the fundamentals for housing are excellent.
Tom Woiwode: I am preparing for a relatively flat year in our area. In July of this year, our market finally matched closed unit volume from July 2007. If you adjust for population growth, we are still behind. However, we have come a long way since the “great abyss” of 2008 to 2012. We have a hugely diverse economy in Savannah. This ensures our highs are not soaring, and our lows are not so bad. We have steady and solid upside.
MP: Do you think we’ll see an improvement in the inventory scenario in 2015? Why or why not?
D.B. Wilson: I personally do not. We have kind of the perfect storm here. The national media is talking about the slowing appreciation rate and the fact that there are still plenty of people underwater, but here in Boulder County, we did not have the run-up in prices like the rest of the country in the early 2000s and, therefore, we did not lose nearly as much in home values during the Great Recession (as a whole, Boulder County lost less than 4 percent in value). Consequently, we have not seen a big bounce in values, but rather, a steady increase. A very big problem, though, is that home sellers are very concerned that they may sell their house and not be able to find a replacement home, and so they are reticent to put their home on the market.