Five Things to Expect From the Housing Market in 2013

Happy New Year and a joyful and prosperous 2013 is wished for all. What can we expect to see in 2013 from the Housing market?

1.  TRENDING UP! Last year we began to crawl out of the deep hole that housing has been in since 2008. It is a long way out but at least we are moving up. In 2012 prices began to trend up while inventory of homes for sale trended down. Nationally, housing hit bottom in October 2011 and home values have risen 5.3% since then. A survey of expert economists predict that home values will rise 3.1% in 2013. Homeowners can be assured that if they sell in 2013 they won't be selling at the bottom of the market.

2.  REAL ESTATE IS LOCAL.  Buying beats renting in almost every market. Here in the Twin Cities buying a home will give you a lower monthly payment than renting in many markets. I have clients who were paying $1200/month rent in Champlin for a 2 bedroom apartment. They purchased a three bedroom townhome and now their payment (including mortgage, property taxes and Homeowner's Dues) is $1100/month. They have more space, nicer amenities, similar area, tax deductions and a lower monthly housing payment. If you want to live in a condo in downtown Minneapolis or in a home on Lake Minnetonka this may not be the case but most areas in the Twin Cities it makes sense to buy a home.

3.  LOW MORTGAGE RATES.  Interest rates continue to be historically low. Combine the low rates with low housing prices and your dollar goes a lot further than it did four or more years ago.

4.  SHORT SALES? When the recession hit the housing market was impacted the most. Homes lost value and many homeowners owed more than the amount their home was worth. This meant they could not sell if they wanted or had to unless they brought money to closing or their lender approved a 'short sale'. For the first time since 2008 the number of 'underwater' homeowners has fallen below 30% nationally. This is a great sign for those who are looking for the housing market to recover. Still 28.2% of homeowners are still underwater which means people who want to sell cannot. Inventory is still low so buyers are fighting over homes on the market. Here in the Twin Cities the majority of homes on the market are receiving multiple offers. If you want to and can sell, now is a great time. Whatever you lose in your sale you will make up in your new purchase.

5.  MORTGAGE INTEREST DEDUCTION.  As our government decides how to cut spending and increase revenue one of the items that is often discussed is the mortgage interest deduction. It is likely that if anything is done with this deduction it will affect the high end (homes with values over $500,000) and second homes. Real estate lobbying groups continue to fight against changes to tax laws allowing for the mortgage interest deduction. Unless you are buying a home with a 1/2 million dollar price tag or more the impact of changes to the mortgage interest deduction will be muted.

Check back for updates as the year progresses. What trends are you watching?