A Look Ahead to The 2013 Real Estate Market

by Bill Gassett on December 15, 2012 · 4 comments

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A Look Ahead to The 2013 Real Estate Market

Underwater Nation: A Look at the New Year

 

Jared DiamondThe following article is a guest post from Jared Diamond who writes on a multitude of personal finance and economic topics. He enjoys sharing insights with broad audiences. Jared serves in a consultancy role with a dynamic set of personal finance companies. The views expressed in this article are those of Jared Diamond and do not necessarily reflect the views of Massachusetts Real Estate News.

According to a recent report from Zillow, more than 30% of the U.S. home-owning population is underwater on their mortgages. This is a grim outlook for the real estate market despite increasing property values, which we can attribute only to the shortage of homes built within the last 12 months. As 2013 looms, will these upside-down homeowners weather the rough economic storm or will they list their properties and try to move on?

The fed is desperately trying to come up with a solution to rescue those individuals who are drowning in negative equity in hopes to free up some of their finances. The logic is that those individuals will then turn to the marketplace with their newly freed funds and bolster the sluggish economy with it. But the fed may be in no position to bail anyone else out with the looming fiscal cliff.

Real Estate 2013It’s great that home prices are rising, but it will provide little relief to the still-crippled real estate market as we move into 2013. Although some markets are seeing sales gains, the current environment may not have enough of an effect on potential buyers as they weigh the pros and cons of investing in a home. Primarily, will the property’s value increase enough to outweigh any potential for negative equity?

But as property values go up, even slightly, so do the ambitions of property owners who may feel they can capitalize by asking for higher selling prices or increasing monthly rents. As such, commercial and residential renters should look to lock in low monthly payments by securing long-term occupancy contracts before prices go any higher in the upcoming year.

“That might be problematic for some rent-to-own properties,” says Brian McNerma, credit consultant with rent to own property listing service, HomeStarSearch. “Sellers will try to make up for their financial losses by passing the negative equity on to potential homeowners.” But not all property owners are underwater on their mortgages, he insists, and he urges those interested in lease-option to research the contract and the seller carefully.

Renters unable to escape higher monthly rents, however, just might consider making the long-awaited home purchase.Record-low interest rates and affordable prices are definitely enticing to new home buyers, but they do little to help those currently upside-down on their mortgages. Therefore, the number of home sales in 2013 – while trending upward slowly but surely – will be greatly limited by those who can’t afford and cleanly walk away from negative equity and start anew.

Bad Mortgage DecisionIn fact, those affected most by negative equity are young owners who purchased homes with low down payments and didn’t have a chance to see equity improve before the housing bubble burst. Now they’re left with financial security enough to maintain the mortgage, but not enough to get out from underneath it.

Despite rising property values, the market is far from healthy. Even with seeming upward trends in major markets, it’s important to look at the other factors that influence those trends prior to making the assumption that things are going well.

The slow growth however, is good long-term as it allows potential buyers to establish down payments, build credit, and take advantage of various financing options without housing becoming too unaffordable. The market depends on this type of behavior, which is much more stable than the easy credit days prior to the recession.

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What's coming in the 2013 real estate market? - WorcesterHomes.net
December 17, 2012 at 6:00 pm

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