Bold predictions for real estate and housing

by Dan Krell
DanKrell.com
© 2012
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fortuneWe survived the “Mayan Apocalypse” of 2012, so what’s in store for the housing market and the real estate industry in 2013?

The “Long Slog:” Although analysts disagree about the date of the housing market bottom, most agree that the national housing market bottomed out sometime time in 2009-2010.  Many looked forward toward 2012 to be a phenomenal year for housing and a return to normalcy.  Certainly 2012 housing figures were better than those of 2011, but in many areas of the country (including locally), the market fell short of outperforming 2010.

Unlike the occasional Pollyanna story about the local housing market, analysts expect “the long slog” or “the long grind” that will take years (emphasis on the plural) to get back to normalcy.  No matter how you articulate it, and barring future economic setbacks, experts describe the climb out from the bottom as a long, slow trudge that will have high and low points along the journey.

Home sale prices: When real estate fell into a seemingly endless downward spiral in 2008, some sectors continued to do well.  Homes priced at and above one million dollars continued to outperform other sectors of the housing market through 2011.  The “upper bracket” sector began to show weaknesses in the early part of 2012; as luxury home sales slowed, mid-range home sales picked up momentum.  However, activity flipped toward the end of 2012; as upper bracket activity increased significantly, while activity in other price sectors decreased.  Until fiscal cliff, debt ceiling, and other government budget debates are resolved; local upper bracket home sales will be inconsistent during 2013.  This market bifurcation can skew local monthly average home sales figures, as well as possibly distorting monthly marketplace snapshots.

Hyper-local real estate: Regional and local variances in home sale prices will require home buyers and sellers to continue to focus on hyper-local data to determine selling prices.  One of the best ways for you to clarify neighborhood sales trends is to consult a local real estate agent for recent neighborhood comparables.

Mortgages & Appraisals:  Getting a mortgage may become be increasing difficult in 2013.  Recent reports of FHA losses and a possible bailout could force new guideline changes to help the venerable mortgage program.  Because of increased foreclosures and delinquencies, there is talk about FHA becoming increasingly credit score reliant, and increasing mortgage insurance premiums for riskier borrowers.

Appraisals will continue to be a lightening rod of criticism and a source frustration.  Since its inception, the Home Valuation Code of Conduct was confusing to everyone, and eventually became a scapegoat for many seemingly inconsistent valuations.  However, a low sales volume due to lack of resale inventory will also create issues with appraisals.

Pent-up demand: No need to worry about interest rates – yet.  Keeping mortgage interest rates low, the Federal Reserve has commented on continued purchases of mortgage backed securities as part of a larger stimulus program.  However, continued low mortgage interest rates may not be the reason for home buyer activity as much as pent up demand.  However, home buyers waiting on the sidelines to purchase a home have been met with low resale inventories during 2012.  For many home owners, the general lack of home equity remains the major reason to not sell a home; and it’s also a reason for low resale inventories to continue through 2013.  Continued low inventory environment will create a competitive environment for home buyers.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of January 1, 2013. Using this article without permission is a violation of copyright laws. Copyright © 2013 Dan Krell.

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