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Best Real Estate Markets in 2014

bre-2A series of wild cards will drive the best real estate markets in 2014 as the U.S. economy drags into an extended splintered recovery. Home prices are forecast to rise but at a slower rate compared to recent trends. The economic recovery, pushed by the largest injection of monetary capital in history by the Federal Reserve has driven home prices higher.

Prices rose in 225 of the 276 cities tracked by Clear Capital, a real estate analytics data firm. Almost all of the 100 cities tracked by CoreLogic’s resale home sales index also saw price gains for the year.

Best Housing Market Forecasts 2012
 Rank   City  Forecast
    1.    San Jose, CA      10.2%
    2.    Miami, FL        9.4%
    3.    Orlando, FL        9.0%
    4.    Tampa, FL        8.9%
    5.    Greenwich, CT        8.8%
    6.    Atlanta, GA        8.8%
    7.    Las Vegas, NV        8.7%
    8.    San Francisco, CA        8.4%
    9.    Seattle, WA        8.3%
  10.    Los Angeles, CA        8.0%
  11.    New York, NY        7.8%
  12.    Chicago, IL        7.8%
  13.    Portland, OR        7.7%
  14.    Phoenix, AZ        7.5%
  15.    Cleveland, OH        7.4%
  16.    Nashville, TN        7.2%
  17.    Dallas, TX        7.2%
  18.    Jacksonville, FL        7.1%
  19.    Austin, TX        7.0%
  20.    Houston, TX        6.9%
However, a series of wild cards trouble the housing market, including rising mortgage rates, technology and shifts in the overall economy. The Fed is in the process of unwinding its aggressive monetary stimulus program, reducing the amount of mortgage-backed securities and U.S. Treasuries it buys each month beginning in January.Higher loan rates should have a major impact on home sales and housing values in 2014, acting to slowdown price gains in all but the best real estate markets.

It’s extremely difficult and convoluted to unwind a monetary program that has produced the biggest bull stock market in memory and the likelihood of doing such without problems is remote. Turbulence could trigger economic issues that would impact housing values, sending home prices on a slide.

Money Examiners analysts, however, are confident that the Fed will use whatever tools it needs to in its arsenal to unwind its stimulus program carefully and slowly to prop home prices up, even if they are temporary. Easing up onbre-3quantitative easing, QE3, will send mortgage rates higher as banks raise rates to re-sell loans off to Freddie Mac and Fannie Mae.

Many of the largest U.S. cities have seen the highest home price inflation over the last year, and some of the hardest hit have witnessed massive rebounds, which are now considered in bubble territory, including Las Vegas. But other issues are also promoting a large volume of sales and appreciation in some cities like Miami, where foreign money gained from illicit drug sales are buying up many properties in cash.

Not since the cocaine cowboys ruled the roost in Miami during the 1970’s, has the city seen such a strong economic impact from the drug trade. Other influences also impact many of the best 20 real estate markets selected by Money Examiners in 2014. Wild cards could change the outlook for the housing market. Technology has been growing since 2010 with a major hiring spree. High tech driven Silicon Valley’s San Jose, California leads the list as a result.

The inventory of homes for sale should increase substantially across most of the U.S. since more homeowners are not underwater on their mortgages and able to sell. Home prices on new homes are also rising, despite higher mortgage rates. New housing starts are at the highest pace in five years, but builders who often say they build only to make big profits could also undermine the marketplace charging new home buyers too much for the homes they deliver.

About the Author

Mike Colpitts is a 26-year veteran real estate analyst. Colpitts forecasts and analysis on the housing market are recognized as some of the best in the industry. He worked as a news reporter, editor and real estate sales professional before becoming an analyst on the residential market.