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Predictions for the 2013 housing market

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housing market predictions

  Odds are you didn’t sit around your Thanksgiving table last year and predict that we’d end 2012 with mortgage rates hovering around 3.3%, or with much of the housing market talk surrounding a “fiscal cliff” (bonus points to you if you had ever used the term “fiscal cliff” back then!). The point is, it’s tough to make predictions about something as fluid as the housing market. However, we’re going to try! Here are our best guesses as to what’s going to happen to the nation’s housing market in 2013:

1.  We will benefit from years of “underbuilding”
For years, the U.S. has had a glut of vacant houses. In fact, shortly after the recession began, 3% of the nation’s existing homes were vacant – an all-time high (normally, only about 1.5% of American homes are vacant). As of mid-November, the vacancy rate was down to 2.1%. Since our vacancy rate has been so high for so long, builders haven’t been building anything new. As a result, all of those existing homeowners won’t have anything “new and shiny” to compete with as they try to sell their homes in 2013, which will undoubtedly make it easier on them. That could give existing home sales a slight boost.

New home sales hit a two year high

2.  Rent prices will hit a plateau
In many cities, rent prices are at an all-time high (just look at Boston, where the average rent is $1,800 per month!). Landlords have been taking advantage of the fact that many people are leery of buying. However, they won’t be able to keep raising their prices forever. With rent prices so high – and home values so low – it’s actually significantly cheaper to buy a home than it is to rent one in many places. But if rent prices get too much higher, renters may just forget their buying fears and dive right into home ownership, simply to save some money!  As a result, landlords will have to cool it with the price increases – or risk alienating a lot of would-be tenants.

3.  Quantitative Easing will backfire
OK, maybe “backfire” is too strong of a word. The goal of the Federal Reserve’s Quantitative Easing plan is to keep interest rates low, and so far, that part of the plan is working. However, the Fed admits that Quantitative Easing is going to be around for the foreseeable future, and that’s where the problem could arise. Fed Chairman Ben Bernanke says he wants to keep interest rates low until 2015. If he does, what incentive do people have to buy anytime in the immediate future? If they know they can take advantage of low rates in a year or two, why buy now? And, if people don’t rush to buy now, will the housing market really be able to spring into action?

How does the government affect your mortgage?

4.  No major changes will take place until the “fiscal cliff” is resolved
OK, this is an easy prediction to make, since the Bush tax cuts are set to expire on December 31st! However, everyone is waiting to see what – if any – cuts are going to replace them. If Americans wind up paying more taxes, they may not be so willing to run out and buy new homes or take on any kind of additional debt. And, until we know just how bad the “fiscal cliff” is, we don’t know how real the threat of another recession is. As a result, many Americans may decide to hold off on making any major purchases – like buying a home – until they see what’s going to happen with the nation’s economy.


 

 

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