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Housing Insiders Predict Uncertain Housing Market

While the housing market has made huge strides since suffering the worst recession since World War II, it's still one of the worst performing sectors in the world's largest economy and experts expect that sluggishness to continue, according to a survey published this week by Zillow. The company's Home Price Expectations Survey shows that housing insiders expect rising mortgage rates to hinder the market in the coming months. Of 104 housing experts polled, 62 percent expect rising rates to have either a "somewhat negative" or "significantly negative" impact on home sales totals. As for where rates will go, the consensus among those polled for Zillow's survey is that the average rate for a 30-year fixed-rate mortgage will reach 5.3 percent in the next two years.

Expectations for mortgage rates to go up are based on a variety of factors, though the overwhelming consideration is that the Fed will end its quantitative easing stimulus program in October. Additionally, the central bank is expected to increase the interest rate banks use when lending capital to each other. This rate has been kept near zero since December 2008, at the height of the recession. With the cost of doing business expected to rise for banks, those costs will eventually be felt by consumers in the form of higher interest rates and fees, making homebuying less affordable and even out of reach for many Americans.

As for home values, the experts polled by Zillow expect prices to increase about 4.5 percent by the end of this year, but do not expect to see peak levels of 2007 until 2017. These rising values will be good for much of the market, but will change the landscape for first-time buyers. According to data obtained from the National Association of Realtors, the median age for first-time buyers was 31 last year, but about 85 percent of respondents in the Zillow survey expect that number to rise to 32 or even higher in the next ten years. The survey also showed that housing insiders expect the US homeownership rate, which stood at 64.8 percent in the first quarter, to drop in the next five years.

August 20, 2014

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