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Record Low rates
When the housing market imploded in 2007 and took the economy with it, experts said the real estate market would never look the same again. Now, nearly six years after the crash, the dust has finally cleared and we have a true picture of the new housing landscape.
While investors may still be leery of hopping back into the market, housing starts, prices and confidence are on an upward trend and the tide may be turning this year to favor home sellers.
Homebuyers can expect a more competitive market in 2013, and should start the mortgage lending process at least three months before they plan to start seriously looking because experts expect the process to take several months under new lending standards. House hunters should be ready to deal right away as inventory is expected to remain at low levels throughout the year. Home sellers are shifting into the driver’s seat with experts expecting bidding wars to break out in certain markets due to the low inventory. While homes will sell quicker this year, they still have to be priced right. The mobility rate has been at a very low rate, meaning that people really did not move during the recessionary years, so there is pent up demand
Mortgage Rates and New Rules
The Federal Reserve has held interest rates steady at near-record lows over the last several years in an effort to entice buyers into the market, and experts don’t expect significant jumps in the rate this year. In fact, the central bank said it would not raise short-term interest rates until the unemployment rate drops below 6.5%. It can be anticipated by year end that mortgage rates may be close to 4%, but still one of the lowest in a generation.
In early 2012 the nation’s largest banks agreed to put aside $25 billion to help fund loan and foreclosure modifications and compensate homeowners who claimed they were given unfair lending terms. Experts expect more mortgage rules to be handed down in 2013 to help prevent reckless lending that led to the meltdown. Additional mortgage rules are aimed at curbing over-borrowing, but could make the process longer for potential homebuyers and could prevent some potential buyers from being able to qualify for a loan. A modest increase in mortgage rates may not be harmful, provided that there is a return to more normal underwriting standards.
Housing Prices
Over the last two years the big question hanging over the market was how much lower home prices could drop, but home pricing indexes started to rise last year and are expected to continue the upward trajectory in 2013. Increasing home prices will bring reluctant homeowners off the fence and will encourage homebuyers waiting for rock-bottom prices to jump in. If you are unsure what your house is worth, get a property appraiser, like Abbe Edelman, out to your existing home for a property appraisal. According to the Mortgage Bankers Association, applications for new-home loans are expected to increase 55% this year.
Housing Inventories
In reaction to the housing oversupply, housing inventories fell more than 40% across the nation since 2007 and experts say below-normal inventory will hold back sales and impede the market’s recovery in 2013 if not corrected. If home prices continue to rise, it will help increase inventories, which will give the housing market a shot in the arm. In many markets sellers are in the driver’s seat because of low inventories.
Foreclosure Activity
There are currently more than a million homes in the foreclosure process across the country, but the crisis on a nation level is over. However foreclosures in the most-battered markets including Florida, Illinois, New Jersey and New York are still high and regulators have been considering state-level foreclosure reform. The housing price rebound is stronger in states with a quicker foreclosure process and less of a backlog, while states with a hefty backlog are holding back the price recovery.
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