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Three out of five housing indicators show signs of improvement

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While 2013 was the year of the investor, 2014 is expected to usher in several pivotal shifts in the housing market, including the dominance of the repeat homebuyer, Jed Kolko, chief economist with Trulia (TRLA) said in his latest housing predictions for 2014.

"As prices rise, buying homes will become less attractive to investors as well as first-time home buyers, but repeat buyers will be able to offset the higher price of the home they buy with the higher price from the home they sell," Kolko said.

In addition to the prominence of the repeat buyers, Kolko believes next year will also see housing affordability worsen, the homebuying frenzy die down and a slowdown in rising home prices.

Furthermore, rental action will swing back toward urban apartments.

“Single-family rentals are peaking, and we are already seeing investor purchases declining,” Kolko noted.  

"There will likely by a decline in the homeownership rate next year since 18-34 year olds will be moving into rentals. The homeownership rate will decline or at least be stagnant, even though what is beneath that should be a healthy moment of young people moving out of their parents' houses into places they rent themselves," Kolko said.  

However, he did advise caution on several areas that may prove to be wild cards in 2014, including job and income growth, the effect of new mortgage rules and the constant changes in Washington, D.C..

"Already we are starting to see some policy moves that are reducing the government role in the market," Kolko said. "They could be trial balloons or the first steps on a long path towards moving the government out of the mortgage. But I do not think this will get resolved or even more clarified in the next year."

Looking back over 2013, Trulia launched its new housing barometer, which tracks existing home sales, new construction starts, delinquency and foreclosure rates, prices from a bubble watch and young adult employment.

“Throughout 2013, the housing recovery has progressed on most fronts but remains unbalanced. Of the five key indicators that Trulia’s Housing Barometer now follows, three are on track towards a full recovery,” Kolko said.

The two lagging in terms of entering a recovery are new construction starts and the employment rate, which are only 36% and 23% of the way back to normal, respectively.

But the good news: non-distressed sales, price levels and the delinquency and foreclosure rates are on track toward a full recovery with those indicators 79%, 71% and 59% of the way back to normal, respectively.  

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