HOUSING GAINS PREDICTED

More modest gains are likely this year, according to the most recent Kiplinger Letter forecast. The national average of appreciation in home values will be up 4 percent-4.5 percent, compared with a gain over 11 percent in 2013.

The top stated reason for this increase is rising mortgage rates, will increase to 5 percent or so for 30-year fixed rate loans by the end of the year. Another possible is that fewer investors are offering all-cash deals, with bargain prices and.

The Kiplinger letter forecasts that new-home building will accelerate again, helping to offset the construction drought of 2008-2012. Keep an eye out for housing starts this year to climb by 15 percent and top 1 million for the first time since 2007. Sales of new homes are predicted to be a bright spot.

Another prediction: More existing homes will go up for sale, as price hikes pull homeowners out from mortgages that are underwater, making them more willing to sell. Sales will climb by 4 percent, but inventory won’t be as tight.

Affordability, though declining, is still better than the historical norm: A median-price home costing 20 percent of household income. In 2013, it took just 15 percent of income to buy an equivalent home. When mortgage rates rise to 5 percent, it will cost 17 percent of income.

More moderate growth this year is not necessarily bad news, it signals a more sustainable, long-term growth trajectory that will help quell fears that another bubble is arising.

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