If you're planning on buying a home in 2013, you can expect to pay more for it now than you would have if you had purchased it in 2012.
New numbers were just released, and they show that asking prices around the country went up 5% in December. And, many sellers are happy to report that they’re getting what they’re asking for. In many of the major metropolitan areas, selling prices were up in December – a big difference from the end of 2011! And, according to economists, you can anticipate an additional 3-to-5% rise in selling prices throughout 2013. So, what’s the reason for the increase? Well, it’s two-fold.
Economists say job growth and shrinking inventories are the main reasons. As the economy continues to improve, more companies are hiring new employees or promoting existing ones. With some more job security, people have the confidence to spend more money, and therefore, purchase new homes.
But in many markets, there are fewer homes for sale than there are prospective buyers wanting to purchase them. So, the rules of supply and demand kick in, and sellers have raised their listing prices.
Where are prices rising the most?
The trend of low inventory causing substantial price increases can be seen the most in cities in the West and Southwest regions of the country. Phoenix saw their asking prices increase the most in 2012, up 26% from the previous year. But the biggest turnaround markets in 2012 were Las Vegas and Seattle. Both had over 10% price gains in 2012, after experiencing more than 10% declines in 2011. Six markets in California saw prices increase more than 10% in 2012 – San Jose (16.1%), Oakland (12.7%), San Francisco (11.9%), Riverside-San Bernadino (11.9%), Bakersfield (11.1%), and Orange County (10.5%). Other cities out West with double-digit percentage increases in asking prices include Denver, CO and Salt Lake City, UT. In the Midwest, Minneapolis-St. Paul and Detroit both had double-digit increases, and down South two cities in Florida also saw their asking prices increase by 10% or more – Cape Coral and West Palm Beach.
Economists say this trend will continue well into 2013, which is why they’re forecasting the 3-5% increases by year’s end. James Paffrath, CEO of Realtypin.com says the price increases in 2012 will springboard asking prices even higher in 2013, estimating a 3-to-5 % increase.
The one “wild card” in all of this is new construction. As prices continue to rise, it will encourage builders to start building again – something we’re already beginning to see in many parts of the country. While construction plays a huge role in our economy as a whole (after all, each new home built creates, on average, three jobs), all of those new houses will add to the inventory. For that reason, economists say home prices could level off at some point during the year – right when many of those newly-built homes are ready to hit the market.
Economists also have their eyes on markets like Las Vegas, Detroit, West Palm, and Miami. Each of those cities saw steep price increases year-over-year, but still have slow job growth, high vacancies, and large foreclosure inventories.
So what does all this mean?
Overall, you can expect home prices to continue to increase in 2013, but not skyrocket to points where they are no longer affordable. Depending where you live, you could see prices only slightly increase, or go up significantly, but either way, now is the time to buy before more sellers raise their asking prices.
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