Over the last few years the real estate market has definitely been struggling on the road toward “recovery.” Although people are waiting anxiously for the real estate market to return to “normal” (aka the real estate market of 2006), more than likely this state of normal is not going to occur.
Yes, the real estate market will continue to make progress toward recovery, and overall 2013 should be a good year for real estate, but do we really want to go back to how the market was in 2006? The short answer is a resounding no.
In 2006, the real estate market was grossly inflated – home prices were bloated, and to say it was a seller’s market is an understatement. We do not want to return to a real estate market that is marked with high home prices but for superficial reasons. Instead, we want a stronger real estate market with home prices that remain stable. We want lenders to be held accountable for their actions and to remain smart about who they provide home loans to – helping to reduce the chances of another crash in the near future.
Let’s take a look at real estate in 2013 – now and predictions for the rest of the year.
Over the last several months many states have been putting forth foreclosure laws that are designed to protect homeowners. One example is the California Homeowner Bill of Rights. Supposedly, this law is helping decrease foreclosure activity throughout California; however, since the law just went into effect at the beginning of this year, time will tell whether the law is reducing the foreclosure activity or whether another factor is the primary reason for the decline.
Either way, throughout 2013, do not be surprised if you see more states creating laws to protect homeowners and help encourage alternatives to foreclosure, especially if this law in California proves to be effective in reducing foreclosure activity consistently throughout the year.
Rising Home Prices
Along with a rise in foreclosure laws, throughout 2013 we expect to see a continuation in rising home prices. The rise will be slow, but steady nonetheless. The real estate market is recovering, and as the market becomes stronger, home prices throughout the country will continue to rise. This fact is especially true if demand continues to increase and the supply becomes limited.
Low Mortgage Rates
Similarly, mortgage rates are currently incredibly low. Throughout 2013, despite the rising home prices and improving real estate market, we can expect to see these rates remain low in an effort to encourage homeownership to help expedite real estate market recovery. Low mortgage rates are definitely an incentive for homebuyers throughout the country.
Decline in Foreclosures
With more lenders encouraging short sales over foreclosures and providing loan modifications as well as other foreclosure prevention assistance, we can expect to see a decline in foreclosures throughout 2013 in comparison to the last few years.
That is not to say that there will not still be foreclosures entering into the market – because there will be – but the percentage is expected to be much lower than the last few years, even in judicial foreclosure states that have lagged behind in recovery.
In addition, we can expect to continue to hear about zombie foreclosures – properties that have been abandoned by homeowners during the foreclosure process but have yet to be acquired by lenders. These properties are definitely hazardous to nearby communities, and something will have to be done to help reduce the number of zombie foreclosures on the market.
Decline in Housing Inventory
As demand rises and foreclosure activity declines, there will be (and already has been to some extent) a decrease in the nation’s housing inventory. As a result, home prices will start to rise and we will slowly transition from a buyer’s market to a seller’s market throughout the year.
Rise in New Home Construction
Finally, in 2013 we can expect to see a rise in new home construction as everyone from potential homebuyers to investors increases their confidence in the real estate market and the demand for housing increases.
At the end of the day, 2013 should be a great year for the real estate market as the country makes progress toward recovery, one neighborhood at a time.
Find more information about the future of real estate in 2013 by reading RealEstate.com’s “Real Estate is Back” infographic and blog post.
This guest post was written by Simon Campbell. He has spent over 15 years in all the various facets of real estate, including sales, purchases, investment and research. His experience also includes commercial and residential property management and even real estate appraisal. Simon is now sharing his knowledge and experience with others through writing, mentoring and consultation. Check out Simon’s profile on Google+ and his blog.