• Josh Valjan

Our Real Estate Projections for 2013: How’d We Do?

At the beginning of the year, we predicted what we thought would be the 5 Real Estate Trends that would dominate headlines in 2013. Let’s see how we did.

Original Post with Grade & Update


Demand for Housing Will Continue to Surge

The housing market has turned the corner and there is no reason to believe that buyer demand will not maintain momentum throughout 2013. Household formations shot up to boom-time levels in 2012 and are projected to increase at even a faster rate over the next twelve months. A lack of inventory will be more of a challenge to sales increases than will a lack of demand.

GRADE: A

Home sales have increased in each of the first six months of the year according to the National Association of Realtors (NAR). Pending Sales (a future indicator of completed sales) are still increasing so we believe this will be a banner year for sales.

Generations X and Y Will Prove They Believe in Homeownership

Contrary to what many have hypothesized over the last few years, young adults (18-35 year olds) are just as committed to homeownership as previous generations. Recent studies have shown:

  1. 43% already own a home

  2. 72% see homeownership as part of their personal American Dream

  3. 93% of those currently renting plan to buy a home

This, along with the increase in household formations mentioned above, makes us believe that 2013 will be the year that many of these young adults will jump into homeownership.

GRADE: C

Household formations are still increasing nicely meaning many are still moving from under their parents’ roof. However, a shortage of inventory at the normal first-time buyer price range (caused by strong investor activity at the lower price points) has stunted this segment of the market. We still believe that, with increases in interest rates and prices causing investors to now think twice, the Millennials will be a major portion of the home buying population through the rest of the year.

Prices Will Continue to Increase

Pricing of any item is determined by supply and demand. Demand for housing will remain strong throughout 2013. At the same time, the supply of homes ready for is shrinking in many parts of the country. Outside of a few states that still have challenges with large inventories of distressed properties (NY, NJ, CT, IL for example), prices will appreciate nicely.

Even in the areas that are still dealing with high percentages of foreclosures and short sales, prices will not tumble dramatically. The increase in demand will absorb much of this inventory. In these areas, prices will either flatten or perhaps soften to a small degree.

GRADE: A

Home prices have increased in each of the first six months of the year according to the Case Shiller Home Price Index. Prices have appreciated stronger than most expected causing some analysts to upgrade their projections for 2013.

Move-Up Sellers Will Return in Great Numbers

Perhaps what many will find as the biggest surprise of 2013 will be the return of the ‘move-up’ seller. Over the last several years negative equity has prevented many of these sellers from moving up to the house of their dreams. However, with prices recovering, more and more of these sellers will realize that now may be their greatest opportunity to make the move to a lifestyle they always wanted.

With home prices expected to increase and more stringent mortgage qualifications (QR and QRM) scheduled to be announced this year, we believe that the first half of the year will bring many of these sellers/buyers to the market.

GRADE: A

CoreLogic in their recent Negative Equity Report revealed that 850,000 homeowners returned to positive equity in the first quarter of 2013 as home values rose. This means that many of these homeowners are again free to sell their home. This coupled with a rise in consumer confidence has caused many existing homes to be added to the inventory of homes for sale. NAR recently reported that the months’ supply of inventory has risen from 4.2 months in January to over 5 months currently.

The Consumer Will Demand That Their Agent Be an Expert

Real Estate professionals who have invested the money, time and energy to truly understand what is happening and why it is happening will separate themselves from their competition and do very well this year.

Those who take that next step of learning how to simply and effectively communicate the market to their clients will be seen as experts. These industry leaders will dominate their markets.

GRADE: PASS

There is no way to quantify this number so a letter grade doesn’t make sense. However, there is no doubt that trust is a key requirement when real estate consumers (both buyers and sellers) now look for a real estate professional. Trust can only be established by agents who truly understand today’s market and will take the time to explain the process with the heart of a teacher.

This blog will help you with the ‘what and the why’. If you are truly committed to being recognized as an expert, go here.

What We Missed…

Mortgage interest rates will obviously dominate many real estate headlines throughout the second half of 2013. We didn’t think that the Fed would begin backing off the stimulus it has been supplying the housing sector until 2014. We were wrong.

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