signs to watch for housing in 2013
We watched for more home
sales and rising prices in 2012. Here's our housing market predictions for next
#1 - Buying gets less affordable
The bust of the
housing market five years ago created one of the cheapest times to buy. Across
many parts of the U.S., even in some of the priciest markets including New York
and Honolulu, it has become cheaper to purchase a home than rent. Record-low
interest rates on mortgages have also made buying more affordable. That's
changing, however. In 2012, prices hit a new low. While that tells us the
market may be is healing, it could also mean buying will be less affordable in
2013. Asking prices for homes for sale rose 3.8% in November 2012 from a year
earlier -- one of the biggest gains since the housing market crashed in 2007.
While rents nationwide are still rising faster than home prices, the trend has
reversed in 14 of Trulia's 25 biggest rental markets including Denver, Seattle
and San Francisco.
#2 - Watch for rising
Most of us watched
home prices to gauge the health of the housing market. That was so 2012,
however. Just because prices are rising quickly doesn't necessarily mean the
industry is doing any better. Next year, a better pulse of the market will be
the rate of jobs growth, says Jed Kolko, chief economist with Trulia. Cities
like Las Vegas, Miami and Phoenix have seen home prices surge, but it's
uncertain how long that could last. Prices have risen, partly because they fell
so much and also because many homes are still undergoing the foreclosure
process. They're also cities in states with some of the highest rates of
unemployment, which ties closely to how well people will be positioned to buy.
#3 - Delinquencies fall (very slowly)
The troubled housing
market was marked by record foreclosures, which is why economists closely watch
the rate at which homeowners are late on their payments -- they're a precursor
to foreclosures. Nationwide, the delinquency rate on mortgages peaked during
the last three months of 2009 at 6.89%, after rising 12 quarters in a row from
1.49% in 2006. As of the latest quarter, the delinquency rate dropped to 5.41%.
And for 2013, it's expected to continue dropping -- albeit, slowly to around
2%. Much of the late payments are made up of existing borrowers more than a
year late on their payments, as opposed to new borrowers following stricter
lending standards. Some of the biggest declines are expected in Nevada,
Minnesota, California and Arizona.
#4 - Record-low interest rates
Cheap money has
certainly helped the housing market recover. For the past few years, average
interest rates on 30-year-fixed mortgages fell to new lows. Rates this year
averaged 3.68%, lower than the average 4.45% for 2011 and 4.69% in 2010. To be
sure, rates can't stay low forever. Which is why some have worried a return to
higher rates could push home prices down again. But if the Federal Reserve has
its way, that won't happen any time soon. In an unusual move during its last
meeting of the year, the central bank's policy-making board decided to leave
rates untouched until the unemployment rate falls to 6.5% so long as inflation
stays low. Which means, according to the Fed's predictions, rates will likely
stay low into 2015.
#5 - First-time buyers
The housing market's
rebound seems to be beginning, but whatâ€™s missing in large numbers were first
time buyers, many of whom were either jobless or couldn't get a home loan or
both. Those who tend to be first-time buyers, 25 to 34-year-olds, suffered far
worse joblessness than most other adults in the years following the recession.
A year ago, unemployment among young workers was 9.2% versus 8.7% for all
adults. The gap has narrowed recently. In November 2012, National average unemployment
among young workers had fallen to 7.9% versus 7.7% for all adults. If the trend
continues, this might help bring first-time buyers back into the market.