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Home prices set to rise 3% in the US in 2014 but mortgage rates will rise

The firm also estimates that mortgage rates will reach 5% by the end of the year and home ownership rates will fall to their lowest point in nearly two decades. To determine which markets will be the hottest in 2014, Zillow combined data on unemployment rates, population growth and its Home Value Forecast to give an early view into housing markets that are likely to experience heavy demand for homes, as well as increasing home values. Top of the list is Salt Lake City, followed by Seattle, Austin in Texas, San Jose in California and then Miami. Making up the top 10 are Raleigh in North Carolina, Jacksonville in Florida, San Diego, Portland in Oregon and Boston. Stan Humphries, Zillow chief economist, pointed out that in 2013 home values rose rapidly at about 5% nationwide and more than 20% in some local markets. ‘These gains, while beneficial in many ways, were also unsustainable and well above historic norms for healthy, balanced markets,’ he said. ‘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 home owners and more new construction. For buyers, this is welcome news, especially for those in markets where bidding wars were becoming the norm and bubble like conditions were starting to emerge,’ he explained. Erin Lantz, director of mortgages at Zillow, pointed out that as the economy improves and Federal Reserve policies change, mortgage interest rates will rise throughout 2014, likely hitting 5% for the first time since early 2010.