Housing market outlook for 2014.

• Author: Kinghorn, Matt
• Position: Industry overview

The year 2013 has been the year of the housing rebound in Indiana and around the country. According to the National Association of Realtors, U.S. home sales during the first nine months of the year were up 12 percent over the same period in 2012. Here in Indiana, the number of houses sold through September 2013 improved by more than 17 percent year-over-year, and the state's median sales price c_limbed 4.2 percent (see Table 1).

TABLE 1: Housing Metrics in Indiana, 2012 to 2013 2012 2013 Percent Change Existing Home Sales 49,883 58,558 17.4% Median Sales Price $118,000 $122,900 4.2% Residential Building Permits 10,302 13,163 27.8% Foreclosure Rate (3rd Quarter) 4.5% 3.2% - Note: Figures for sates, prices and permits represent activity through September of each year. Sources: Indiana Association of Realtors, U.S. Census Bureau, and Mortgage Bankers Association Other measures of housing activity are improving, too. Building permits are up by nearly 28 percent through September 2013 and the state's foreclosure rate has fallen significantly in the last year.

Unprecedented affordability conditions helped to spur the housing rebound, but the cost of homeownership will likely increase in 2014. Not only are house prices on the rise again, but mortgage rates are climbing too (see Figure 1). According to Freddie Mac, the 30-year fixed mortgage rate jumped from 3.45 percent in in April 2013 to 4.19 percent by October. In their October forecasts, both the Mortgage Bankers Association and Freddie Mac predict the rate will climb above the 5 percent mark in the second half of 2014. By historic standards, however, housing in Indiana should remain affordable for some time.

Looking to 2014, we expect that Indiana's home prices, residential construction activity and foreclosure...