The New Year is always a time for Americans to vow to eat less and save more. After all, who doesn't want to be thinner and richer next year?
But a tradition of this column is to offer New Year's resolutions for home buyers and home sellers, plus a few New Year's financial resolutions that anyone could use to get their money in better shape.
First, the overview: As we look back over 2013, it's clear that the housing crisis has turned around. New monthly foreclosures are down to levels last seen in 2008, and new and existing home sales are stronger. Home prices surged midyear, and now those increases are moderating. It's plenty tough to get a mortgage -- and it might get a little tougher, now that the qualified residential mortgage rules are going into effect.
On the plus side, the Federal Reserve Bank continued to buy mortgage-backed securities and other securities to the tune of $85 billion per month during the year. Will that continue? That depends. While the labor participation rate is extremely low, the official rate of unemployment fell to 7 percent, the lowest in five years. Still, the true measure of unemployment says about 11 percent of eligible workers are unemployed. That hurts.
In truth, most families in America have tightened their belts further. For them, the recession hasn't ended. Purchasing power is lower and real income has hardly budged. For most Americans, this isn't a Christmas of plenty. Judging by our mail, plenty of homeowners are having trouble making their mortgage payments, even as delinquencies have fallen a bit from all-time highs.
There's still a brighter outlook for real estate now than at any time since 2007, even though new construction is stuck around 450,000 units per year, or about half of where it should be -- a depression by any stretch of the imagination.
Where does that leave buyers? The times aren't as good as they were a few years ago. Mortgage interest rates are at 4.5 percent for a 30-year fixed-rate loan, up 1 percent or so from last year. And prices are up as well. That means affordability is down.
EXPECT LOW RATES
As we said last year, mortgage interest rates will likely stay low through early 2015, or until the economy really starts taking off. Janet Yellen will likely (as of this writing) take over for Ben Bernanke in January, but she isn't expected to change much.
If you're hoping to buy a home to live in or to invest in during 2014, here are a few New Year's resolutions:
1. Understand your credit history and credit score. For better or worse, these will rule your financial life. You can get a free copy from each of the credit reporting bureaus once a year from AnnualCreditReport.com, but you'll still have to pay for your score (about $9). It's worth knowing what your score is before you apply for a loan.
2. Find the best loan, on the best terms. That means you'll have to do your homework. Despite the government securing or guaranteeing nearly all loans through Fannie Mae, Freddie Mac and FHA, banks are offering different terms. Talk to at least four or five lenders before making a decision.
3. Build the best home-buying team. Whether you're buying investment property or a home to live in, you'll want to create a team of real estate professionals who can help you find the right property, at the right price, on the best terms, without any headaches.
Think about including a great real estate agent, mortgage lender, real estate attorney, tax preparer (with experience in investment real estate if you plan on buying real estate as an investment), and real estate home inspector to start. Residential real estate investors will want to add a 1031 exchange professional and commercial (if appropriate) inspector to the mix.