At the beginning of each New Year, I like to survey the pundits' predictions of how real estate will do in the year ahead and extrapolate what I consider the best opinions offered. In recent years, those projections of things to come were not anything to celebrate.
How upset I was in early 2007 to witness the real estate bubble deflating at great speed and to be told by the experts at that time that the bust would be a deep and long lasting one. “It may be 2014 before real estate is back on track,” one industry observer predicted at a real estate conference I attended at that time.
Wow, 2014? But this is the very shank of my real estate career, I remember thinking. I couldn’t believe that it would be more than the historical five-year cycle before we were flush again with home values and sales.
But that is the way it has played out, and the foundations of such a rebound have just started to take hold in the past year, supported by stable job gains and record-low mortgage rates. Another reason for the rebound is that the excess supply of new homes built during the housing boom has finally thinned out. At the same time, sales of previously occupied homes rose to the highest level in three years.
As we ring in the New Year, here are the specific areas of promising housing news, gathered from a variety of sources, from Bloomberg and Trulia, to About.com. I didn’t extrapolate all the predictions they make, but cull the best that seem reasonable for our region.
Prediction of Pricing
After bumping down the steps of pricing for several years, we are starting to see selling prices that are closer to asking prices and in some cases, because more buyers are suddenly on the scene in a market with diminished inventory, prices are actually increasing. Some pundits say that prices will rise anywhere from 5 to 7 percent in 2013, over 2012.
More Buyers, More with Cash in Hand
When the market tanked, real estate investors were the first to pull a disappearing act. Now they are back and their pockets are stuffed with cash, figuratively speaking. This is the best sign of recovery that we’ve seen and is one factor in the increase in selling prices. In 2013, we suddenly will have former homeowners who may have lost their homes three years ago, along with first-time home buyers and cash investors, all fighting for the same limited housing inventory of entry-level homes.
More Sellers Will Get off the Fence
Because of the factors outlined above, homeowners who have been sitting on the sidelines will jump into the market knowing that they can get a better price for their home, especially if they have upgraded them.
More Upgrades Will Fuel the Contracting Business
Home sellers have learned during the recession that if a home is to sell at its best price, it must be updated to the point where it is move-in ready.
I happen to live in an 18th century home and I thought that it entitled me to have a slightly dated kitchen and bathrooms because they had a certain country charm. When my house was on the market earlier this year, I told prospective buyers that I had opted not to update these rooms because I wanted to leave that to the new owners. Hogwash.
Prospects still want to see “new,” even in an historic home, I’m convinced, so I have taken my home off the market to totally re-do the kitchen and bathrooms. I’ll enjoy the project, and who knows? I may want to live in my updated house for a couple of years more before downsizing.
More New Housing Starts
There will be increased new housing starts in 2013, based on rising home prices, limited inventory, and increased demand from first-time home buyers.
Mortgage Lows Will Rise
It’s inevitable, mortgage lows will rise, but not significantly. At the same time, mortgages will remain harder to get, with lenders having learned their lesson from the subprime debacle that got us into all this trouble in the first place.
The Second Home Market Is Back
Recently I have serviced three families who have full-time residency in one of the boroughs of New York City who decided that the time was right to invest in a second home in the country. One of them fell in love with our area so much that they decided to move to their second home on a full time basis and use their NYC apartment only for weekend trips to the city, a vice-versa situation.
The Overall Prediction
For all of us who have waited patiently to recoup the recession’s losses on the value of our homes and to once again experience real estate as the best investment ever, 2013 promises to reveal the light at the end of the tunnel. And it’s bright. So, Happy New Year, home owners!
Bill Primavera is a licensed Realtor® affiliated with Coldwell Banker and a marketing practitioner who writes regularly as The Home Guru. For questions or comments about the housing market, or selling or buying a home, he can be reached directly at 914-522-2076.