Trends to Watch in 2013

greenwood_dickSM– Dick Greenwood, Director, Builder Marketing

After five years and over 16 million foreclosures since the 2008 housing crash, the housing market has turned positive. National home prices have increased for eight straight months and in some markets, 57% of the homes for sale have attracted multiple offers. Does this mean 2013 will yield a positive housing market? Here are the trends I see for 2013 in the real estate market:

1. Rising Home Prices. It’s going to happen based on supply and demand. Nationally we have a 5.4 month inventory of homes for sale. A six month supply is considered a healthy market.

2. Rising Rental Rates. Again, it is the supply and demand rule. Almost 5 million Gen Y’ers have been riding out the shaky economy by moving back home. 2013 is the year they start moving back out.

3. Fewer Foreclosure Bargains. That’s because the Federal Housing Finance Agency and banks have been selling off hundreds of distressed loans in bulk. This trend will continue.

4. More First-time Buyers. Deloitte & Touche, a well respected research management firm predicts 2013 to be a year of growth, as demand for single family homes is driven by first time buyers.

5. Higher Home Construction Costs. Material costs of drywall, lumber and copper are increasing to recent new highs, so in some parts of the country, lumber and drywall are quoted on a “spot time” delivery basis. “Spot time” meaning if it is delivered at 9am, you pay the market price at that time. A 2pm delivery time will yield the 2 o’clock price; this translates to higher prices for the consumer.

6. Labor Shortage. The construction labor shortage will really manifest itself this year. During the past five years, millions of tradespeople have left the industry, never to return. It will take years for the trade schools to supply the manpower needed.

7. Easier Credit Standards. The last few years have seen credit tightened so much that qualified people could not get a mortgage. I predict that the credit “pendulum” has begun to swing back to a reasonable normal, where people will start buying in numbers again.

8. Rising Mortgage Rates. With rates at all time lows, there is no place for them to go but up. I see rate increases, but not so much as to cut demand.

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