No, I do not have a crystal ball or have the innate ability to see into the future, but if the recent past is the best indicator of short-term future directions, I think I have an intelligent inkling of the real estate paths we will travel during the next 12 months.

1. Price increases will slow. There is no way the market can sustain annual price increases of 20% or more. 2013 was Southern California’s real estate comeback year.  2014 will be the “Return to Normalcy” year. Enough of the double-digit price increases–eight is a good number and that’s my prediction for 2014.

2. Demand will remain high, but buyers will be more selective as the stampede to buy softens and their expectations rise. Bargain real estate properties will be harder to find, and consequently, the higher priced product must deliver more value.

3. Inventory will increase. The higher prices will slow the rate of absorption as affordability becomes an issue for a growing number of buyers. Deferred sellers who waited out the falling property values during the recession years, will finally enter the market to take advantage of recent price gains.

4. Interest rates will edge up. The cheap money party may not be completely over, but it is winding down. Nothing lasts forever, and 2014 appears to be a very good year for locking in 30-year loans at still very low rates.

5. 2014 will be the year of the “Move Up” buyer (and seller). Here’s why: The move up buyer’s current home has increased in value while the ample supply of luxury homes, those homes priced over $2,00,000, remains plentiful in many local markets.  The beach cities of the South Bay are an exception–high-end homes move from just listed to just sold at a very fast pace.  A growing number of  luxury sellers will be delighted to welcome more activity, and entry buyers will step in to purchase the move ups’ current homes.

6. Six closing random real estate thoughts on what lies ahead:  1) The luxury market will thrive.   2) Cash buyers will continue to drive the multifamily income market.   3) Big box real estate franchises will lose the ability to adapt to the rapidly changing real estate scene.   4) Coastal values will continue to soar.   5) Consumer will continue to shop independently on the Internet, but once they team up with an agent they will demand a higher level of competency and complete transparency.   6) Pocket listings do not serve the best interest of sellers and perhaps it is more a wish and a hope than a prediction, but this agent hopes they become a thing of the past in 2014.

Wishing you and yours a happy and prosperous New Year!