Home sellers will likely be in a good position in 2014 as the market continues to show signs of improvement. Many have been waiting for ripe conditions to put their homes on the market, and this year might be the ideal time.
Following a year of strong price growth, America's homeowners watched their equity increase. Where many would have otherwise been forced to stay in their homes, price appreciation seen throughout 2013 - often jumping year-over-year by double-digit gains - has been the primary reason sellers are now well-positioned.
The recession and subsequent downturn of the housing market left many Americans with underwater mortgages. However, the slow and steady recovery since then has helped get them back on their feet, and many will finally be able to sell in 2014. Here are three reasons why homeowners will be in a good position to sell this year:
New home sales increased in January
The latest report from the Mortgage Bankers Association showed a surge in home sales in the first month of 2014. According to the data, there were 38,000 new home sales in January, marking a 36 percent increased compared to December. The sales translate to a seasonally adjusted annual rate of 543,000, up 35 percent from the month before.
"While the big jump may appear to conflict with other data, such as MBA's purchase application index and NAR's existing home sales data that point to a weak market for existing homes, our Builder Application Survey estimate is consistent with reports of homebuilder sentiment that show strength in the market for new homes," said Mike Fratantoni, MBA's chief economist. "It is also worth noting that the significant January increase also followed a particularly slow pace of sales in November and December."
While this report shows demand remains strong for new homes, buyers are likely relieved that inventory constraints are finally easing, and any additional inventory - be that from current homeowners or new construction - is a welcome sign for buyers.
Mortgage rates encouraging buyers
Another sign that homeowners will be in a good position to sell this year is the fact the mortgage rates will continue to remain affordable for homebuyers.
Freddie Mac's latest Primary Mortgage Market Survey indicated that mortgage rates were relatively unchanged in the week ending Feb. 13. The data showed that a 30-year fixed-rate mortgage averaged 4.28 percent during the week, up from 4.23 percent a week before, while a 15-year fixed-rate mortgage averaged 3.33 percent during the week, unchanged from the previous week.
"Mortgage rates were little changed amid a week of light economic reports," said Frank Nothaft, vice president and chief economist at Freddie Mac. "Of the few releases, the economy added 113,000 jobs in January, which was below the market consensus forecast and followed a slight upward revision of 1,000 jobs in December. Meanwhile, the unemployment rate fell to 6.6 percent, which makes thirteen consecutive months without an increase."
Delinquency rate hit five-year low
The third and final sign that provides proof sellers are in a better position is that the delinquency rate fell to 3.85 percent at the end of the fourth quarter, marking the lowest rate in five years.
"It's encouraging to see the mortgage delinquency rate drop for two consecutive years, but at the same time, mortgage delinquencies continue to be twice as high as levels observed prior to the housing bubble," said Steve Chaouki, head of financial services for TransUnion. "The housing market also still shows some volatility, with both housing prices and originations dropping in the latter part of 2013 after experiencing improvements in the first part of the year."
As sellers are prepping their homes for a sale in 2014, it's a good idea to start the process by having a property inspection.