In an article with the same title, this week the Business Insider website tells us about a survey of 2000 adults done through Trulia.com. 61 percent of the respondents predicted that prices in their local real estate markets would rise in 2013. 58% believed that it would take 10 years or less for prices to get back to their pre-peak levels. Even more dramatic, 80 percent of renters said that they still plan to buy a home someday.
Business Insider talked to real estate economists and insiders to come up with a list of ten trends to watch in real estate in 2013.
1. Rising home prices - builders have been building very few homes between 2008 and through 2012, as they didn’t expect to be able to sell them at profitable prices. This has contributed to a low inventory of livable homes. While foreclosures are price-interesting, few regular buyers can afford them and the rehab required, much less get a mortgage to buy a foreclosure. Low inventory is expected to continue for some time, contributing to rising prices as demand grows.
2. Rising rents - somewhere around 3 to 5 million younger people in their twenties and thirties have been living with their parents through the real estate downturn. They are expected to move out, but few will be able to make the required down payment or qualify for a mortgage. For these reasons rental demand is growing and rents are increasing steadily.
3. Fewer foreclosure bargains - recent bulk foreclosure sales to major investors coupled with better economic conditions is beginning to reduce the glut of foreclosures and the number of new ones coming on the market.
4. More short sales - recent Fannie Mae and Freddie Mac reductions in the documentation necessary for a short seller to prove hardship is helping to move short sales along. Lenders have also changed their approach, and are even encouraging short sales, as they save money as compared to the foreclosure process.
5. More first time home buyers - first time home buyers have been notably absent from the market for the last five years or so. This is expected to change in 2013. Though there won’t be a deluge of new first time buyers, economists expect a significant increase in their numbers and interest.
6. Higher home construction costs - the long period of low construction of new homes has resulted in a couple of important expected influences on home construction costs very soon. First, material costs like copper and sheetrock are high, and a new surge in building will result in a surge in those costs. Also, a great many construction workers left the country or entered other professions during the crash. A shortage of skilled labor will cause wage increases.
7. Property management boom - recent bulk sales of thousands of foreclosed properties to major investors for rental units is creating a demand for property management professionals. There are also a great many individual smaller investors with multiple units, and they’re also looking for good property managers.
8. Rising mortgage interest rates - despite the Fed’s assurances to the contrary, mortgage interest rates really only have one direction in which to move. Expect gradual but steady increases in interest rates in 2013 and beyond.
9. Loosening credit standards - the massive pullback in lending over the last five years is expected to begin to change in 2013. More buyers in the marketplace and lenders competing for their business should result in looser mortgage lending standards.
10. Consolidation in the home building industry - lending for major construction isn’t going to get looser however. It is predicted that only major builders will have adequate access to capital to finance their building projects. This will freeze out small to medium size builders, resulting in consolidation of business with the big players.
Are their predictions correct? Only time will tell, but many of them seem logical when we take a hard look at current market conditions.