According to a recent News-Press article, Lee County permits to build new homes in 2013 spiked up 40% and foreclosures fell 45 percent. While values are nowhere near the peak in 2006, the number of households that are “underwater” is headed in the right direction. In addition, continued steady net new employment growth is now finally translating into household formation, which were profoundly depressed in the last several years. As a result, first time homebuyers have stopped their six-year decline and are finally rising once again.

Brandon Cornett of the Home Buying Institute wrote the following in his Real Estate Market Predictions for 2014 forecast. “In 2013, housing markets in California, Las Vegas and Phoenix generated an inordinate amount of news coverage. Inventory plummeted in these areas, driving home prices upward at a headline-generating pace. Many California cities posted annual price gains of 20% or more over the last 12 months. In 2014, Florida’s real estate market will move into the media spotlight, edging out some of the other markets in the country. Housing inventory is dropping sharply in some of Florida’s major cities. In Naples, for example, the total number of property listings on dropped nearly 22% over the last year or so.”

But there are some headwinds for the new year. Experts are expecting interest rates to rise above 5% by the second half of the year as the Federal Bank starts to taper off and eventually cease their stimulus strategy efforts called “quantitative easing”.

In addition new mortgage lending rules that kick in 2014, such as the Qualified Mortgage (QM) rule, will define the residential mortgage market. This rule in particular, requires borrowers to have “a total (or “back-end”) debt-to-income ratio that is less than or equal to 43 percent” For a temporary transitional period, borrower with DTI ratios above 43% might be considered “QM-compliant”, as long as the loan is otherwise eligible for sale to Fannie Mae or Freddie Mac.

Prospective borrowers who are pushing the 43% debt to income ratio limit should look at ways to reduce their other debts, such as credit cards.

The Ability-to-Repay rule, in particular requires lenders to obtain and verify a wide range of documents to ensure borrowers have the means to repay their loans.
At the core, theses new rules are designed to make mortgage lending less risky.

With home prices still affordable and current interest rates still low, 2014 will bring opportunities along with potential challenges to those seeking to purchase a new home. If you are in the market to purchase real estate and are seeking a mortgage, it is wise to get prequalified before making your offer. Ask your professional Realtor for a referral of a qualified senior mortgage professional to advise and assist you through the process.

David CollinsAbout the author: David Collins is a Senior Mortgage Loan Officer with Mutual of Omaha Bank and has lived in SWF with his wife and 2 children for over 30 years. He explains why Southwest Florida’s real estate market will be one to watch in 2014. He holds a BA in Business Management from Assumption College and in addition to his professional career, he currently serves as a Director on the Lee Memorial Health System Board and has served for other non-profit charities in Lee County.