Zillow is making four “bold” predictions for 2014: U.S. home values will increase by 3 percent; mortgage rates will crack 5 percent; borrowers will have easier access to a mortgage; and the homeownership rate will drop to its lowest level in 20 years.

Zillow Chief Economist Stan Humphries says that the more modest home value growth he predicts for 2014 reflects a more mature, stable market that will exist a year from now. “(In 2014), home value gains will slow down significantly because of higher mortgage rates, more expensive home prices, and more supply created by fewer underwater homeowners and more new construction,” Humphries said in a statement.

As the housing market resets toward more sustainable, realistic lending standards and home value appreciation expectations, Humphries expects homeownership to drop to below 65 percent, a level it hasn’t seen since the mid-1990s.

Even though Zillow predicts mortgage rates will rise to above 5 percent by the end of 2014, the competition for fewer borrowers will force lenders to ease their standards, said Erin Lantz, Zillow’s director of mortgages. Home affordability will remain high, too, in many markets despite the rate increase, she said.

Based on projections for unemployment rates, population growth and the home values via the Zillow Home Value Forecast, Zillow predicts the following metros will have the hottest housing markets in 2014 (in order): Salt Lake City; Seattle; Austin, Texas; San Jose, Calif.; Miami; Raleigh, N.C.; Jacksonville, Fla.; San Diego; Portland, Ore.; and Boston.

Source: Zillow

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