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Home Price Forecasts Keep Rising in 2013

The Incline of Housing Prices

The Incline of Housing Prices

The housing market is rebounding faster than many experts thought it could. Time-honored wisdom said that the way home prices skyrocketed in 2012 would mean that 2013 should be a cooling off period for prices. And yet quarter one has shown home prices increasing this year over last.

The Standard and Poor Index showed on Tuesday that prices in January were 8.1% higher than they were during the same month of 2012.  Compared to December, when home prices were “only” 6.8% higher than December 2011, that’s a significant increase.  Zelman & Associates’ chief analyst, Ivy Zelman, originally estimated a 3% increase in housing prices over 2013, and has since revised her forecast to 5%, then 6%, and just last week revised it again to 7% for the year.  She’s also anticipating a 5% growth for next year due to growing demand. She cites 30 year low housing inventories, strong mortgage financing and rent inflation as the key areas that are driving the housing increase now and for the next 4-6 years.   

Similar analysts at Bank of America, J.P Morgan Chase, Morgan Stanley, and Capital Economics have all revised their forecasts of home prices upwards between two and six percent over the past three months. It’s a near-certainty that a house purchased today will be worth more by the end of the year.

Why Are Prices Rising?

Home prices are rising for the same reason any product’s price rises: supply can’t keep up with demand. The question is, where is all this demand coming from? The unemployment numbers remain fairly steady; the median income hasn’t received a significant bump.

Who is it that’s buying all the houses?

Bill McBride of CalculatedRisk.com believes the answer may lie in the baby boomers: In the decade from 1994 through 2003 (data started in 1994), the Bureau of Labor Statistics (BLS) reported the number of people “55 and over” and “not in the labor force” increased by 4.3 million.  But in the last 9+ years, from January 2004 until February 2013, the BLS reports the number of people over 55 and not in the labor force increased by 8.1 million. So more older people are leaving the labor force.

 This increase in the number of retired Americans with smaller household sizes means the relationship between jobs and households has changed over time….this is one reason why the US needs more housing.

Why Does This Matter To Me?

What does this mean for mortgage-seekers?  Simple: move fast.  The longer you wait, the more likely it is that the home price will rise underneath you. More importantly, the rate at which home prices is rising will decrease — meaning that the longer you wait, the more money you pay, but the less appreciation you’ll see.  If you want to see your investment maximized, moving quickly is the best thing you can do. Finally, the interest rate that you pay on borrowed money is rising as well. Therefore you will pay more on the amount you borrow.

Call me today(949) 973-0141 — and let’s talk openly about how you can get the most for your money and put yourself in the best financial situation going forward. It’s free, it’s zero-pressure, and you’ll get all your questions answered.

Scott Storace

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