RFG_Blog_January13 (Demo)

2013 Predictions: What Will Happen in the Real Estate World?

The year 2012 has ended and the effects of the economic recovery are beginning to be seen. Prices of real estate have stabilized in most parts of the country, and even begun to rise in a significant number of areas. The oversupply of distressed inventory has dropped, causing a rebound of prices in certain neighborhoods with a high percentage of foreclosures. Credit remains difficult to obtain, but there are signs that traditional lenders may begin lending again in a more meaningful way. RFG’s predictions for 2013 are as follows:

The Foreclosure Glut May Be At Its End

The number of sales of foreclosed houses will continue to fall. It dropped 28% percent from mid-2012 from mid-2011, and it is anticipated that this trend will continue. The large governmental agencies that insure thousands of homes in foreclosure made a concerted effort to sell off these loans in bulk to investors who have found it more profitable to renegotiate the terms of a borrower’s loan than to foreclose. By doing so, homes previously in foreclosure have been converted to performing loans. In addition, rising home prices in certain areas have improved the equity position of borrowers as the rising price of the home has righted their upside down loan. This trend should continue through 2013.

Short Sales Will Become More Commonplace

Recent changes on the rules regarding short sales by Fannie Mae and Freddie Mac in late 2012 will result in many more short sales being approved prior to foreclosure. These changes, among other things, reduce the documentation that borrowers must provide to support their short sale request. In addition, banks have begun to understand that they will suffer smaller losses if they approve a short sale rather than pursue a foreclosure to its end. Buyers prefer to purchase from an owner, who can give disclosures and information about a property, rather than buy from an anonymous bank with no pertinent information about the property. Common sense tells them that the information from the prior owner will carry an increase in value over an REO. In addition, evidence shows that borrowers are more likely to maintain a property while hoping for a short sale than they are when a foreclosure is taken place. While the percentage of home sales that are foreclosures will fall, the number of short sales should continue to increase through 2013.

Entry Level Homes Will Dominate The Sales Market

Historically, the American home buyer was always looking to move to a bigger house, but that trend may be reversing. Over the past seven years, many home owners have lost their homes through foreclosure or short sale and are now ready to re-enter the real estate market. They have learned a valuable lesson, however, and are not looking for a bigger home, they want the same, or smaller home than they already had. This will help drive sales in the entry level home category. In addition, as employment rates rise and more young adults are able to find regular employment, they will be looking to become home owners, further strengthening the entry level home market.

Great Opportunity Exists in the Hurricane Sandy Affected Areas

Sadly, many home owners lost their homes in the North East as a result of Hurricane Sandy that struck in late October. It has become apparent that many of the damaged homes cannot be repaired and will need to be completely rebuilt. Many affected home owners have expressed their unwillingness to continue living in coastal or waterfront communities and are seeking housing inland. In addition, many real estate transactions expected to occur during the fourth quarter of 2012 fell through due to lenders’ unwillingness to lend until properties were re-appraised to insure that there was no hurricane damage. Further, many transactions fell through because of insurers’ unwillingness to issue new policies on properties in hurricane affected areas for a period of time shortly before the hurricane and for several weeks after. It is predicted that there will be a building and buying boom in the hurricane affected states.

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