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2013 Real Estate Trends

Real Estate economists and insiders predict the 2013 market trends to include:  increasing home prices, increasing rent prices, less foreclosure bargains, an increase in short-sales, an increase in first time buyers, higher home construction costs, an increase in property management, an increase in mortgage rates, and easier credit standards.  However, these predictions are based on the mainstream forecast of economic growth being correct and that the economy won’t fall off the fiscal cliff this year.

Increasing Home Prices

The 2012 pattern of slow paced new-home construction driving up prices of homes will continue in 2013.  According to Calvin Schnure (economist at National Association of Real Estate Investment Trusts), to keep up with population growth, new home and new apartment construction needs to be 1.25 to 1.5 million units each year and new construction has only been 500,000 units  or less for six years now.  This has created a shortfall in available homes.  As a result, experts expect a five percent increase in home prices for this year.

Increasing Rent Prices

Another finding is that 3 to 5 million people (in their twenties and thirties) who moved back in with their parents or staying with friends, are now getting jobs.  They’re also now looking for their own apartments.  Demand for rental units has increased substantially.  Average rent prices have increased four percent and even more in metro areas, seven to nine percent.

Less Foreclosure Bargains

As foreclosure sales decreased in 2012 to 11 percent from the 28 percent of the previous year, the opportunity to get low priced foreclosures has disappeared.  This is partly because distressed loans have been sold in bulk to purchasers who agree to work out new terms with borrowers instead of foreclosing.  The decrease is also attributed to the improvement of borrowers’ equity position which resulted from the increase in home prices.

Increase in Short Sales

On November 1, 2012, the FHFA issued new rules on short sales for Fannie Mae and Freddie Mac.  Less documentation is needed for borrowers to prove hardship and borrowers also don’t have to pay the difference of the loan balance and the price the house is sold for.

Increase in First Time Buyers

According to a Deloitte & Touche report, first time buyers will drive the increase in demand for single-family homes.  A 2012 survey released in November reflected 39 percent of borrowers were first-time buyers, an increase over 37 percent in 2011.

Higher Home Construction Costs

Labor costs and materials are at high prices.  Qualified construction workers moved out of the country or into other industries after the 2008 crash, which still leaves a shortage in workers now.

Increase in Property Management

The FHFA sold bulks of foreclosed properties in 2012 to investors who agreed to hold and manage the properties as rentals.  Many of these investors are using property management companies to oversee the renting and maintenance of these properties.

Increase in Mortgage Interest Rates

Experts expect the interest rates to increase because they were at an all-time low consistently in 2012.  The NAR expects the rate to increase to four percent this year.

Easier Credit Standards

Last year borrowers needed a FICO score of 760 or greater to qualify for homes.  This was much higher than what was needed years before the easy-credit housing boom.   Banks will decrease the required score amount to compete with other lenders.



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