Here is an excerpt from Forbes predictions for the 2013 housing market:
1. Buying gets less affordable
In 2012, prices hit bottom. Finally! While that tells us the market is healing, it could also mean buying will be less affordable in 2013. Asking prices for homes for sale rose 3.8% in November from a year earlier — one of the biggest gains since the housing market crashed in 2007.
2. Watch for rising jobs, not rising prices
Most of us watched home prices to gauge the health of the housing market. That was so 2012, however. Just because prices are rising doesn’t necessarily mean the industry is doing any better. Next year, a better pulse of the market will be the rate of jobs growth, says Jed Kolko, chief economist with Trulia.
3. Delinquencies fall (very slowly)
As of the latest quarter, the delinquency rate dropped to 5.41%. And for 2013, it’s expected to continue dropping — albeit, slowly to around 2%. Much of the late payments are made up of existing borrowers more than a year late on their payments, as opposed to new borrowers following stricter lending standards.
4. Record-low interest rates
To be sure, rates can’t stay low forever. Which is why some have worried a return to higher rates could push home prices down again. But if the Federal Reserve has its way, that won’t happen any time soon. In an unusual move during its last meeting of the year, the central bank’s policy-making board decided to leave rates untouched until the unemployment rate falls to 6.5% so long as inflation stays low. Which means, according to the Fed’s predictions, rates will likely stay low into 2015.
5. First-time buyers
Those who tend to be first-time buyers, 25 to 34-year-olds, suffered far worse joblessness than most other adults in the years following the recession. A year ago, unemployment among young workers was 9.2% versus 8.7% for all adults. The gap has narrowed recently. In November, unemployment among young workers had fallen to 7.9% versus 7.7% for all adults.
If the trend continues, this might help bring first-time buyers back into the market.
Keep in mind that these are predictions for national housing trends. We have already been experiencing many of these over the last year including lots of first time homebuyers and challenges in affordability. Local buyers have been surprised by prices and multiple offers due to extremely low inventory. Hopefully we will see some increases in inventory this Spring. Creating a more balanced market for buyers.