The housing recovery took a step back in 2014, thanks to red hot home prices taking a sledgehammer to affordability. First-time buyers sat on the sidelines, and most of the sales action was on the high-end. That may be about to change in the new year. Here are my predictions:
1. There will be more houses. As household formation improves, home builders will respond, and as more homeowners come up from underwater, they will list their homes for sale.
2. Mortgage rates will rise. I was wrong on this one in 2014, but who wasn't? I'm taking a chance on rational economics again. Go figure.
3. Home prices will cool off. They're already cooling off because homes aren't selling at these numbers. The double-digit gains of 2013 are long gone, and that's good for the health of the overall market. Look for flat to small gains for the year and a few months in the negative.
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