2013: Could You Be Priced Out of the Housing Market?

Realtors were hopeful that 2013 would begin on a high note with an increase in sales and listings, and boy have we seen them recently! Perhaps due to the avoidance of the fiscal cliff or building off the momentum of the past few months, the housing market is coming back well ahead of some economist’s estimates. While this is good news for realtors and those looking to list, could some buyers actually be priced out of the market if they wait too long?

While the recent rise in the market may seem too fresh and unstable, some markets in the U.S. are seeing huge recoveries right now. The Phoenix area saw an increase of sales at 21.7% according to S&P Case-Schiller Data last month, with hard hit areas like Detroit, Miami, and San Francisco not far behind. The result has been a sharp incline in prices for those areas, as home owners discover the supply and demand to be in their favor. Sadly this means that some potential home buyers may find themselves unable to afford homes that they may have been able to only a few short months ago. 

J.P. Morgan is now forecasting overall increases of 3-4% in home prices for 2013, but like the above cities, many areas are already seeing these increases before the spring selling season even begins. This winter has been hot for home sales as many buyers begin to see the signs that historically low housing prices are set to take off this year. 

Not all cities are seeing the rapid growth of Phoenix or Miami though; The same index saw a small drop in the New York and Chicago areas. Boston, and our friends in Cleveland only saw gains around 2%, meaning buyers are much less likely to make the jump into something new right now.  

The biggest plus right now for people who are unsure about purchasing this year: You guessed it, those great rates on mortgages, which financial analysts are predicting will stick around for almost all of 2013. The 30-year fixed mortgage rate is expected to remain under 4% for most of the year, but could move a little lower or higher depending on market conditions. 

Real Estate site Trulia is saying that the market is “51% back to normal” for the month of November, based on a 6% increase in existing-home sales. The wildcard for the 2013 housing market will be the so-called “shadow inventory” of distressed homes that number in the 2.3 million and at the current pace of the market even out to a 7 month supply. Analysts will be watching to see how quickly these homes sell and for what prices to determine the rise in housing prices in the coming months. 

New sellers listing their homes and builders adding to the supply will also have an impact on the market. While we’re seeing a little bit of an uptick in listings after the first of the month, we really won’t know what’s going to happen until we’re well into spring. If there is an increase, prices may not rise as sharply and homes may remain more affordable. Not only will buyers find it easier to afford a new home, but bidding wars will be easier to avoid. 

Other factors affecting the market include the fear over cutting of the mortgage-interest tax deduction, which survived the fiscal cliff talks but may be up for grabs again when congress begins talking debt ceiling towards the end of the month. Many lawmakers support it’s cut, which could raise the overall cost of home ownership. Another point is the low vacancy/high prices associated with renting right now, leading several potential buyer to consider home ownership more seriously.  

No matter the conditions or your own budget, there will always be wonderful homes in your area that could be the perfect match with the help of the right realtor.