Happy New Year Housing Market!!
Americans have not yet lost faith in real estate, despite the millions of foreclosures they have witnessed since the 2008 housing crash. In a recent survey, 61 percent of respondents predicted that prices in their local market would improve over the next year. Almost 80 percent of current renters said they plan on buying a home someday. Whether or not that enthusiasm has merit, the signs of a turnaround are hard to ignore. National home prices have been on the uptick for eight straight months and jumped 6.3 percent year-over-year in October – the largest increase since June 2006. Bidding wars on houses are making a comeback in Texas. Will this trend hold in 2013? Most experts say their predictions depend on the mainstream forecasts of economic growth next year being correct and that is also assuming that the economy will not experience any severe hiccups.
There are trends that support these predictions of improving economic news for home sales. The slow pace of new-home construction continues to push prices up. The construction of new homes and apartments needs to be between 1.25 and 1.5 million a year just to keep up with population growth. But since the housing crash, new construction has been at 500,000 units or fewer for 6 years running—that’s actually created a shortfall in available homes. Overall, the National Association of Realtors forecasts average home prices to rise 5 percent in 2013. This bodes well for the housing market as far as prices are concerned.
Rents are on the rise. This is problematic for mostly those in their twenties and thirties who have been riding out the shaky economy under the auspices of their parents or other friends. Renting is going to be a challenge for those in middle income America. The prices are simply off the chart. This year, average rents have been rising nationally at about 4 percent a year and in many metro areas by 7 to 9 percent. Buying has definitely become more attractive and more affordable on a monthly basis.
The chance to snap up a bargain-basement foreclosure could be fading. Sales of those homes fell to about 11 percent of all sales in June 2012, down from about 28 percent in March 2011. In part that’s because the Federal Housing Finance Agency (FHFA), the Federal Deposit Insurance Corporation, and banks have been selling off hundreds of distressed home loans in bulk to purchasers who agree to work out new terms with borrowers rather than simply foreclosing. Foreclosures have also dropped because the equity position of thousands of borrowers has improved with rising home prices, righting many upside-down loans.
Short sales are deals in which a home sells for less than what the borrower owes on the mortgage, with the bank agreeing to accept the sale in lieu of going through an expensive and time-consuming foreclosure.
Mortgage rates have been at historic lows this year, so there’s only one direction for them to go. The NAR predicts that rates will gradually rise to average 4 percent next year.
There is a prediction of easier credit standards. On average, would-be borrowers now need a FICO credit score in the 760s to get a mortgage, much higher even than the years before the easy-credit housing boom began, according to the FHFA. That should start changing next year–qualifying scores will start dropping as more qualified buyers come into the market and lenders compete to offer them loans
If these trends continue, this will be good news nationally for a recovery in the real estate market. A strong real estate market is good economic news for the country as well.
Source: “10 Real Estate Trends to Watch in 2013.” 10 Real Estate Trends to Watch in 2013. 06 Dec. 2012. Web. 30 Dec. 2012.
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