2013 predictions: Healing market, continued low rates

Story Image

Experts say property values should strengthen in 2013.

It’s time to gaze into the crystal ball and see what is forecast for the housing market in the New Year.

With a residential revival already under way in the Chicago area, housing analysts are looking forward with optimism to 2013. “The last few months have brought a spate of favorable news on the U.S. housing market with construction up, more home sales, and home-value growth turning positive,” noted Frank Nothaft, vice president and chief economist for Freddie Mac.

“This has been a big change from a year ago, when some analysts worried that the looming ‘shadow inventory’ would keep the housing sector mired in an economic depression,” Nothaft said. “Instead, the housing market is healing, is contributing positively to GDP and is returning to its traditional role of supporting the economic recovery.”

“This has been a big change from a year ago, when some analysts worried that the looming ‘shadow inventory’ would keep the housing sector mired in an economic depression,” Nothaft said. “Instead, the housing market is healing, is contributing positively to GDP and is returning to its traditional role of supporting the economic recovery.”

Gazing into the future, here is what Freddie Mac’s U.S. Economic and Housing Market Outlook is forecasting for the nation’s housing market in 2013:

Look for long-term mortgage rates to remain near their record current low of 3.32-percent for the first half of 2013. However, rates will rise gradually during the second half of the year, but remaining below 4 percent.

Expect property values to continue to strengthen with most U.S. house price indexes likely rising by 2 percent to 3 percent in 2013.

Household formation should step up further. Look for a net increase to 1.20 million to 1.25 million new household formations in 2013. Housing starts should rise to around a 1 million annualized pace by the fourth quarter.

Vacancy rates for both apartments and the single-family for-sale market could shrink aggregate vacancy rates to levels not seen since 2002 and 2003 as household formation outpaces new construction.

While the refinance boom will continue into early 2013, loan volume will decline compared with 2012. Look for single-family mortgage originations to decline by 15 percent. Conversely, multifamily lending should rise approximately 5 percent.

It appears a residential revival already is underway in the Chicago area. RE/MAX Northern Illinois and Midwest Real Estate Data reported that November sales of attached and detached homes in the seven-county area totaled 7,500 units, 37 percent more than in November of 2011.

The median sales price was $155,000, up 3.3 percent from the $150,000 median price recorded 12 months earlier. Average market time, which is the average number of days a home sold in November was on the market before a sales contract was signed, fell from 170 days in November of 2011 to 136 days in November of 2012.

Home sales in Chicago climbed 22 percent to 1,770 units, and the city also recorded the biggest rebound in home prices. The median sales price in November was $180,000, 16 percent higher than a year earlier.

The median price of attached homes, including townhomes and condominiums, rose 7 percent in Cook County to $133,151, and jumped 12 percent in Chicago to $205,750.

Don DeBat’s weekly real estate column is syndicated by DeBat Media Services. For more home-buying information visit his Website at www.dondebat.net.