Top Things to Watch for in 2014

Economy, Interest Rates, and Housing

  1. Experienced lenders will have a huge advantage. New lending rules and strict compliance requirements will be too overwhelming for some. Dodd-Frank rules are still only 50 percent implemented and smaller lenders may not be able to afford legal staff or counsel necessary to monitor compliance.
  2. Expect inflation in 2014 to wind up no higher than 1.5 percent, possibly lower. From import prices to producer prices, from the CPI to the Federal Reserve’s favorite measure of inflation, core Personal Consumption Expenditures, are all running well below the Fed’s target of 2 percent.
  3. Interest rates will be stable into early 2015, although exceptionally low mortgage rates are a thing of the past. Auto loans and other short term rates will barely be affected by tapering of Fed purchases.
  4. The unemployment rate should be at or near 6.5 percent by the end of 2014. Jobs begin 2014 where they were in early 2013, averaging 190,000 per month. Most economic headwinds are behind us, and we could see increases to 220,000 per month.
  5. New home sales up, existing homes stay flat. The flood of distressed sales pushed existing home sales up at the expense of new homes, but distressed sales as a percentage of all home sales will decline. Existing home sales should stand pat at 5 to 5.25 million while new home sales rise by about 20 to 25 percent – to about 525,000.
  6. House prices could see a 5 to 6 percent boost. Look for slowing median house price increases and more rapidly rising average house prices, courtesy of increasing income disparities between the rich and everyone else. Inventory bottomed in 2013, but a 5 percent increase should increase supply, enabling more first-time buyers and move-up buyers to find a home.
  7. The economy could finally break out of its low growth funk. An election year means politically motivated saber rattling over the budget will be kept to a minimum. The most recent budget deal will help increase GDP due to the short-run increase in government spending, and decrease economic uncertainty. Overall, expect a one-point rise in GDP to 3.1 percent in 2014.