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?

Market Update

Here is your monthly Real Estate Market Update. It just keeps getting better. Prices are increasing, days on market is decreasing, inventory is decreasing. Great news for sellers.

Click here to see report.

If you have been thinking about buying; don't hesitate. Interest rates are still at an all time low. There are down payment assistance programs out there for incomes up to $120,000 annually (depending on this size of your family). Questions? Call me. Or email me. I will be happy to answer any questions you have about buying a home.

Real Estate is Coming Back

Are you out there trying to find a home to buy? You did your homework, got pre-approved for a mortgage, looked at homes on line, then found a Realtor and begin your search? Then you found the perfect home and made an offer? It was a good offer and you were looking forward to finishing the process and moving in a few months. BUT - your Realtor called and told you there were multiple offers on the home you wanted and you had to submit your 'highest and best' offer within the next 24 hours. So you checked comparables and made the best offer possible. After waiting three days your Realtor called to tell you the seller accepted another offer.

If this sounds familiar, you have been trying to buy a home during the last four months. The market has changed a lot. Home prices are up in the Twin Cities 12% over the last year. Inventory is low and there are so many buyers it is very difficult for anyone to find a home. A few weeks ago I showed a town home and called to check availability. I was told that there were 49 offers on the home.

This turnaround began about 4-5 months ago and is finally being reported by the media. This is GOOD news for sellers. The price you couldn't get for your home a year ago may be possible today. And you will be able to sell your home faster than you could a year ago. With interest rates still so low a seller who only dreamed of moving up a year ago could do it today.

What's Happening with the Real Estate Market?

Here is some encouraging news - reprinted from Inman News 2/24/2012

Existing-home sales post third gain in 4 months

Increased demand from investors and first-time homebuyers helped boost existing-home sales in January - the third increase in the past four months, the national Association of Realtors reported.

NAR said total existing-home sales - including single-family homes, townhomes, condominiums and co-ops - were up 4.3 percent from December to January, to a seasonally adjusted annual rate of 4.57 million.

While that's essentially unchanged from the same time a year ago, for-sale inventory was down 20.6 percent from a year ago, to 2.31 million homes, a 6.1 month supply of homes at the current pace of sales.

Many housing analysts view a six-month inventory of homes as a good balance between supply and demand - a larger inventory of homes can indicate an oversupply of homes for sale, which can undermine prices. When inventories drop below six months, the shortage of homes for sale can drive up prices.

"The broad inventory condition can be described as moving into a rough balance, not favoring buyers or sellers, " NAR Chief Economist Lawrence Yun said in a statement.

Yun cited the statistics as evidence that a government proposal to convert bank-owned properties into rentals on a large scale "does not appear to be needed at this time."

"Foreclosure sales are moving swiftly with ready homebuyers and investors competing in nearly all markets," he said.

Merrill Lynch analysts Michelle Meyer and Ethan Harris think part of the drop in inventory is due to delays in the foreclosure process in the aftermath of the so-called "robo-signing" scandal.

With top banks nearing a final settlement with state attorneys general, they expect the foreclosure process to accelerate, and for inventory to swell to eight months later this year.

The first REO-to-rental transactions are weeks away, but the property pools offered this year may be smaller and more manageable for groups of qualified local investors than previously assumed, Ken Harney reported.

NAR said foreclosures and short sales accounted for 35 percent of sales in January, and that the national median existing-home price for all housing types was down 2 percent from a year ago, to $154,700.

Investors purchased 23 percent of homes in January, up from 21 percent in December, while the percentage of first-time homebuyers increased from 31 percent in December to 33 percent in January.

Nearly one in every three January home sales was an all-cash transaction. A survey of NAR members showed more than half had at least one contract cancelled or delayed in January, often as a result of a mortgage application being turned down or because appraisals come in below the negotiated price.

Single-family home sales were up 3.8 percent from December to January, to a seasonally adjusted annual rate of 4.05 million. That's a 2.3 percent increase from a year ago. The median existing single-family home price as $154,400 in January, down 2.6  percent from the same time a year ago.

Existing condominium and co-op sales increased 8.3 percent from December to January, to a seasonally adjusted annual rate of 520,000. That's a 10.3 percent decline from a year ago. The median existing condo price was $156,600 in January, up 2 percent from January 2011.

At the regional level, the West saw the biggest jump in sales, an 8.8 percent increase from December to January. Sales were down 3.1 percent from a year ago, however, and the median price was also down 1.8 percent from January 2011 to $187,100.

The Midwest saw the smallest jump in sales, with sales up 1 percent from December to January. Although that was a 3.2 percent increase from a year ago, the median home price fell 3.9 percent from January 2011, to $122,000.

In the South, existing-home sales rose 3.5 percent from December to January but were unchanged from a year ago. The median price in the South was $134,800, down 0.3 percent from a year ago.

Existing home sales were up 3.4 percent from December to January in the Northeast, and up 7.1 percent from a year ago. At $225,700, the median price in the Northeast dropped 4.2 percent from January 2011.