It’s been about a month-and-a-half since I wrote my outlook for the 2013 housing market and it’s already time for a revision.
In a nutshell, I expected home prices to rise in 2013, though not as strongly as in 2012. I expected demand to stay strong, but supply to start to grow as more homeowners finally have enough equity to sell. Just one month in to 2013, Supply is clearly contracting even further. As a result, I wouldn’t be at all surprised to see home prices in Contra Costa and Alameda Counties rocket up another twenty percent this year.
In my previous forecast, I wrote:
We aren’t going to see more REO’s in 2013 than we did in 2012. Foreclosure activity has been lower lately, and with the lag, even if things started picking up now, we wouldn’t see much change in inventory until 2014.
I expect that there will be some gains in both short sales and old-fashioned equity sales. Why? Because we’ve got a huge backlog of people who have been waiting. I don’t think we’ll see a “mad rush to the exit” without some dramatic event, but I do believe more sellers will try and take advantage of recent price increases… especially so if news reports begin to suggest any negativity.
Supply will also grow a little simply because houses will sit and not sell. A home that an investor would have bought a year ago for $250,000 may sit longer on the market unsold for $300,000 in 2013. Housing Supply was SO low in 2012, any increase will be noticed and appreciated.
2013 will also be the year that new home construction returns in earnest. Buyers who aren’t finding much in the MLS may find exactly what they are looking for in a brand new home.
I don’t expect huge changes, but I do think things will get a little better out there for buyers.
Since then, it’s clear that homeowners are, en masse, waiting. A Redfin survey concluded as much:
With Demand still strong and Supply even tighter, 2013 is shaping up to be an extremely strong year for home prices. Every neighborhood is a little different of course… check out some of Andrew’s recent posts, detailing different areas from around the Bay.
Who knows how far this market will run. At some point, prices will be high-enough for more Sellers to cash out. Maybe we peak this Summer. Maybe next Summer. If this trend continues, it won’t be too long before home prices around the Bay Area reach new all-time highs.