Promising Signs for More Improvement in Housing Market in 2013

Happy New Year!

The housing market, both in the Bay Area and across the country, certainly showed impressive gains in 2012 with sales and median sale prices up in most markets and distressed sales and foreclosures down. In fact, the biggest challenge many of our local markets faced last year was not having enough homes to sell in order to satisfy the growing demand from buyers. How far we’ve come in just a few short years!

As we kick off 2013, there are a number of positive signs out there that the momentum we saw last year will only accelerate in the new year. Many widely followed industry analysts believe we will see gains in sales, prices and new home construction this year from coast to coast.

National Association of Realtors Chief Economist Lawrence Yun believes the steady housing market recovery will continue over the next several years, barring further tightening of mortgage credit availability.

Yun reports that, “Existing-home sales, new-home sales and housing starts are all recording notable gains this year in contrast with suppressed activity in the previous four years, and all of the major home price measures are showing sustained increases.”

While mortgage rates have been at historic lows, Yun expects these rates to rise to an average of about 4.0 percent this year and 4.6 percent in 2014.

With rising demand and shrinking inventory, NAR foresees “meaningfully” higher home prices. The organization estimates that the national median existing-home price rose 6 percent to $176,100 last year, and predicts it will increase another 5.1 percent in 2013 to $185,200 with a similar increase in 2014.

NAR isn’t alone in its bullish forecast. According to the UCLA Anderson quarterly forecast released last month, the U.S. housing market should be a major driver for the nation’s economy over the next two years – a change from past years when housing trailed other sectors.

UCLA Anderson economists say that the U.S. housing market may have been late to the economic recovery, but it is now taking the lead. “With the recovery more than three years old…housing is gaining strength,” said UCLA Senior Economist David Shulman in his report, Beyond the Cliff. “In fact, the late arrival of the traditionally early pickup in the housing market has become the leading source of strength.”

So where does all this leave us? While no one can say for certain what the future holds, most signs point to the fact that the housing market will continue to see steady improvement. Interest rates remain near historic lows, and home prices are rising again. The economy is gaining strength, albeit not as predictable and solid as we’d like to see. And the job market continues its gradual acceleration.

Locally, this gives us a very optimistic outlook for 2013’s Bay Area housing market.  It should be even more robust than 2012’s. The market has turned in a big way since the recession and there just aren’t enough listings to go around. Sellers are getting good prices for their homes once again – in some cases, multiple offers over their asking price.  In San Francisco and the Peninsula, most of 2012 was challenged with 40% to 50% of the previous year’s inventory, even less in some communities; coupled with rising sales activity.

The two most widely known axioms associated with real estate; Location, Location, Location – and Supply/Demand, have never been more important. Here in the Greater San Francisco Bay Area, we are extremely fortunate to have both in our favor.  If a homeowner is considering selling this year, the best advice may be, to not wait for other homeowners in the area to do the same.  Now may be the perfect time list your home while the numbers are in your favor.

Best wishes for a happy, healthy and prosperous new year!