New Home SalesCENSUS
437K
U.S. Housing Market · 2014
U.S. Housing Market in 2014
taper tantrumuneven recoveryprices clear 2007 peak
Existing SalesNAR
4.94M
Median PriceNAR
$208,900
30Y MortgagePMMS
4.17%
2014 was the year the U.S. housing recovery stalled. Existing-home sales fell to 4.94M — down from 5.09M in 2013 — as the QE3 rate spike of mid-2013 took hold.
Median existing-home prices reached $208,900, finally clearing 2007's nominal peak after seven years. But the recovery's geographic distribution was uneven — coastal cities and the largest MSAs were back to peak prices, while many mid-sized Midwest and Sunbelt markets remained 20%+ below 2006 levels. Mortgage rates averaged 4.17%, up from 3.66% two years prior — the so-called taper tantrum.
Macroeconomic Context
The Federal Reserve's long-telegraphed tapering of its QE3 bond-buying program proceeded methodically through 2014, with the monthly purchase amount reduced by $10 billion at each meeting from January through October, when the program concluded entirely. Rather than disrupting markets the way the 2013 Taper Tantrum had, the actual tapering was largely absorbed without incident. Thirty-year mortgage rates, which had spiked to 4.5 percent in 2013, drifted back toward 4.0 percent during 2014 as demand for U.S. Treasuries from foreign buyers remained robust.
GDP grew approximately 2.5 percent for the year, and the labor market continued its steady healing: unemployment fell from 6.7 percent to 5.6 percent, the largest annual decline since the immediate post-recession bounce of 2010. Consumer price inflation was subdued at roughly 1.6 percent — persistently below the Fed's 2 percent target — partly because of a sharp decline in oil prices that accelerated in the second half of the year as OPEC refused to cut production in the face of rising U.S. shale output.
Geopolitically, Russia's annexation of Crimea in March and the subsequent conflict in eastern Ukraine triggered Western sanctions and ratcheted up geopolitical uncertainty. The rapid rise of ISIS in Iraq and Syria dominated national security discussions.
For housing, 2014 was a year of disappointment relative to optimistic forecasts made in late 2013. Existing-home sales actually pulled back from 2013 levels, as the combination of rising prices, tight inventory, and the prior year's mortgage rate spike reduced affordability. The share of first-time buyers fell to its lowest level since the 1980s. The recovery was real but uneven — strongest for move-up buyers and investors, weakest for the first-time segment.