2012 was the best year for home sales since 2007. The inventory of homes for sale dropped, helping to stabilize the market. In most places, home prices appear to have hit bottom for this cycle. The median sale price rose in 2012 as the number of foreclosure sales decreased. And interest rates remain at historic lows.
Buyers who were resistant to buying into a plunging market are preapproved and ready to go. Many want to buy sooner rather than later, before interest rates and prices start moving up. In some markets, this is easier said than done.
In well-located niche markets, the drop in inventory last year was extreme — as much as 50 percent lower than 2011. This turned buyer’s markets into seller’s markets where buyers far outnumbered sellers. Multiple offers were common in choice areas and often resulted in higher sale prices.
Sellers have been waiting for a good time to sell. You’d think that the improved housing market would encourage sellers to take advantage of the best time to sell in many years.
In most cases, sellers will have to sell today at a lower price than they could have realized had they sold before the bubble burst. Prices may never be that high again, or not in the near future. It’s expected that the inventory will pick up somewhat in March and April as sellers who have a good reason to sell will put their homes on the market.
Some would-be sellers bought at the peak of the market with little or no cash down, or they refinanced and pulled equity out of their home. They owe more than their home is worth even in this picked-up market.
Until prices move up significantly, many of these sellers are stuck in their homes unless they have cash to buy their way out. Without the cash resources and a real need to move, these sellers are likely to stay where they are.
Some sellers are encouraged by the current market and think if they wait a while longer, they’ll see a higher sale price. This could be the case or not.
Most of the housing economists forecast a good year for home sales and prices in 2013. National Association of Realtors Chief Economist Lawrence Yun expects the median existing-home price to rise 5.1 percent in 2013. Existing-home sales are projected to increase by 8.7 percent. Yun expects the upward trend in the market to increase through 2014.
Yun also expects that interest rates will increase during this period due to inflationary pressures. He believes rates will average 4 percent in 2013 and 4.6 percent in 2014. From the standpoint of affordability, now is a good time to buy if you can find a home that will suit your long-term needs. Higher interest rates and prices decrease affordability.
HOUSE HUNTING TIP: Although the housing market rebounded spectacularly last year, there are still dark clouds on the horizon. Limitations on available mortgage credit and national and global economic uncertainties could keep home prices and sales lower than the optimistic housing experts predict.
In a recent article in the New York Times, Robert Shiller, professor of economics and finance at Yale University, stated that the data doesn’t clearly suggest a particular direction for home prices. They could rise or fall.
The housing market is so localized that prices in this country could go up and down at the same time, depending on location.
Sellers who are sitting tight, waiting to see if their home will be worth more in a year or so, might reconsider. The demand for housing is strong now and financing is cheap.
THE CLOSING: Even though it’s a good time to buy, it’s risky to buy for the short term.