Real Estate Market 2013: What Agents and Homeowners Can Expect in 2013
Real estate agents are masters at taking historical data and translating it to determine home values. They’re also quite adept at analyzing data from the present to determine current market conditions. How accomplished, though, are they at predicting the future?
This question came to me after reading a recent blog post here on RealEstate.com called “Real Estate is Back.” The article reviews the results of a recent ActiveRain survey of 2,430 real estate professionals who gave their predictions of what to expect from the real estate market in 2013.
Putting on my real estate consumer hat, I wondered: Is the housing outlook as rosy as they predict? So, I thought it might be interesting to check their predictions for 2013 against those of various economists, housing analysts and other expert real estate prognosticators to see if they stand up.
Sort of a swami smackdown, if you like.
Economists look at several indicators when they’re preparing their housing market forecasts, including, but not limited to, foreclosure inventories, new housing starts and unemployment and interest rates. Many use housing starts to predict supply and NAR’s “Existing Home Sales Report” to focus on demand. Let’s take a look at what these experts are predicting that we can expect in 2013.
From January to February of this year, new housing starts rose a modest 2 percent, according to the National Association of Home Builders, yet decreased from December 2012. Furthermore, the number of building permits “climbed less than starts,” according to Bloomberg’s Michelle Jamrisko. Until we see that number take off, heralding a boom in new construction is a bit premature.
In fact, NAHB forecasts call for 641,000 single-family units in 2013, which is well down from December, January and February’s numbers.
Even more troubling is that builder confidence is down, according to the NAHB. “Although many of our members are reporting increased demand for new homes in their markets, their enthusiasm is being tempered by frustrating bottlenecks in the supply chain for developed lots along with rising costs for building materials and labor,” claims NAHB Chairman Rick Judson.
Adding to the low confidence factor are appraisal problems and tight credit, according to Judson.
At this point, any number of houses hitting the market is a welcome relief to agents working with buyers who are competing with investors for whatever is on the market that’s in good condition and priced right.
It does not, however, bode well for their 2013 prediction regarding new home starts. While a rise in housing prices will incentivize builders, as agents claim, 2014 will be the year of the new housing construction boom, not 2013. So, since they were almost right, we’ll give the ActiveRain agents one-half of a point on this one.
For the past few years, housing industry analysts have been warning us about the dreaded “shadow inventory” of foreclosures waiting in the wings. Anywhere from 3 to 10 million homes, they said, were set to flood the market – as soon as they worked their way through the foreclosure process.
All the gloom and doom predictions were for naught, says a January report from the analytics firm, CoreLogic. The shadow inventory actually fell 12.3 percent in October 2012 from the previous year.
“The current shadow inventory stock represents little immediate threat to a significant swing in housing market supply,” said Mark Fleming, chief economist for CoreLogic. He goes on to foresee that “investor demand will help to absorb the already foreclosed and REO properties in the shadow inventory in 2013.”
RealtyTrac, on the other hand, predicts that 2013 presents a mixed bag. While the picture is rosy overall, the firm foresees a year that is “book-ended by two discrete jumps” in foreclosure activity according to Daren Blomquist, vice president at RealtyTrac.
“We expect to see continued increases in judicial foreclosure states near the beginning of the year as lenders finish catching up with the backlogs in those states,” he explains. At year’s end, he foresees a new round of foreclosure increases in non-judicial states “as lenders adjust to the new laws and process some deferred foreclosures in those states.”
Because all real estate is local, your mileage may vary. For instance, although the national foreclosure rate is down, foreclosure rates in half the country are still relatively high. Last year, 25 states saw decreases and 25 states saw increases in foreclosure activity.
In fact, Florida is now the foreclosure poster child, replacing Nevada. Most of these increases aren’t new foreclosures, however, but lenders plowing through the backlog built up after the robo-signing disaster.
All of this is far better news than we’ve received from forecasters in previous years, no matter which way you look at it. Since they predict that foreclosure inventories will fall in 2013 (although the experts aren’t saying by how much they’ll drop), score one for the intrepid real estate prognosticators from ActiveRain.
In a normal real estate market, the average vacancy rate for homes — not on the rental market — is about 1.5 percent nationally, according to economist Bill Conerly. In the fourth quarter of 2012, we were at 1.9 percent, down 0.4 percent from the same time period in 2011, according to the U.S. Census Bureau.
While it appears that we are coming close to a normal amount of inventory, it is falling, not increasing, as the agents forecasted.
There is a caveat, however, and one Dr. Conerly mentions in Forbes. Over the past few years, new housing starts have plunged, shrinking available housing supplies. Low interest rates, on the other hand, spurred would-be homeowners into the market, raising demand and shrinking the availability of existing homes.
To increase inventories we need a hefty rise in home prices, according to Fox Business reporter Kathryn Buschman Vasel. How hefty, you ask? Enough to “bring reluctant homeowners off the sidelines,” claims Vasel.
The ace forecasters at ActiveRain know that prices are rising and set to take even bigger hikes this year, so let’s chalk this one up another point for the team.
When it comes to predictions, the experts are all over the map on how much prices are expected to rise in 2013. Earlier this month, Fiserv Case-Shiller predicted that home prices are expected to increase an average of 3.3 percent annually through September of 2017.
CoreLogic, a bit more optimistically, predicts that home prices will jump 6 percent this year.
JPMorgan Chase & Co. is even more ebullient in their forecast. Last week they revised their previous forecast, more than doubling it, and now say that home prices are set to rise a whopping 7 percent in 2013, while Bank of America says 8 percent.
As real estate agents know, tight inventories cause rising prices. So, as frustrating as it is right now, the shrinking inventory situation is a blessing for homeowners who are trying to regain at least a smidgen of equity before listing their homes for sale.
Once again, on the topic of which way home prices are going in 2013, ActiveRain agents do it again.
Overall, it appears that real estate agents, at least those that hang out at ActiveRain, know their stuff. Go on over and take a look at the infographic and let us know your thoughts.