DEC 2, 2013 1:03pm ET

Housing Recovery Still Has Momentum, Economist Says

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Home prices will increase at a much slower rate in 2014 as investors become less aggressive and more homeowners put their houses up for sale, according to Bank of the West chief economist Scott Anderson.

The chief economist says a lot of potential sellers have been watching the run-up in prices and are waiting for the right time to sell their homes. “If they see that softening in home prices, I think you will see more potential sellers jump into the market,” says Anderson. “That would make for a more balanced market.”

Anderson’s forecast calls for the S&P Case-Shiller home price index to rise 2.8% in 2014 compared to 13% this year.

He noted that institutional and individual investors will still be in the market in 2014. But the “bargains are gone and the inventory of foreclosed homes is very limited.” So they won’t be as aggressive in bidding up prices.

Meanwhile, the housing recovery still has momentum despite the headwinds of affordability and tight credit. “We have been digesting the home price and interest rate increases fairly well,” the former Wells Fargo economist said in an interview.

Based in San Francisco, Bank of the West is a subsidiary of BNP Paribas.

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