What to Expect from the 2013
It's true that considering the last few years, any kind of forecast is a brave venture! However, based on the 2012 market and current conditions we can get a reasonable idea of events we might see this year.
Interest Rates Will Probably Go Up Slightly
The Mortgage Bankers Association announced in January that they expect the interest rate for a 30-year fixed mortgage to rise to 4.4 percent by the last quarter of 2013. This is still extremely low when you consider that mortgage rates were over 6 percent in 2008, and - brace yourself - over 18 percent for a brief period in 1981. (That's almost mind-boggling in hindsight, isn't it?)
Still, every percentage of a point makes a difference when you're talking about payments on a long-term mortgage, so if you've been putting off refinancing, now might be the time to move forward.
Rates have been hovering at just over 3.5 percent lately. You can check today's rate on the Bankrate.com website.
More Help On the Way for Underwater Homeowners?
Remember HARP 2, the Home Affordable Refinance Program that allows homeowners to refinance a first mortgage even if they owe more on the loan than their home is currently worth? The program has no limit on how far borrowers can be underwater as long as they are current on recent payments and meet some other requirements.*
HARP 2 is only open to borrowers whose loans are backed by Freddie Mac or Fannie Mae, however. HARP 3, now being discussed in Congress, would potentially open the door to refinancing for underwater homeowners with jumbo loans, subprime loans, and other non-traditional mortgages.
* Some lenders participating in HARP 2 refinances impose their own guidelines, i.e., a 125 percent loan-to-equity limit. If this is holding things up, try shopping around.
Home Prices Are Generally Expected to Rise
The word is in: Core Logic announced last week that home prices rose 8.3 percent nationwide in 2012, and they expect prices to rise another 6 percent this year.
Predictions are all over the map, not surprisingly, according to a Wall Street Journal article by Nick Timiraos called "The Year Everyone Was Wrong (Again) About Home Prices." With economists who made mostly erroneous predictions last year now calling for everything from a 6 percent drop to a 7.2 percent increase in home prices in 2013, it's kind of an entertaining read.
Notable Home Price Facts of 2012:*
- Phoenix, AZ: Up 22.8 percent year-to-year.
- Detroit, MI: Up 24.6 percent from its low point in April 2011.
- Las Vegas, NV: Up 10 percent year-to-year, but still down 57.2 percent from its peak in August 2006.
* Data from November 2012 S&P/Case-Shiller Home Price Indices.
Housing Supply Will Probably Stay Low for a While
Why did U.S. home prices rise beyond the expectations of most people in 2012? In large part because the supply of homes dropped dramatically, while at the same time buyers regained confidence in the market and surged forward to take advantage of extremely low mortgage rates.
If home prices rise further, more homeowners who are currently underwater will be able to sell without doing a short sale. For now, however, many areas of the country are faced with a bottleneck of high demand and low supply.
Remodels Are Creating More Bang for Your Buck
According to the Remodeling 2012-2013 Cost vs. Value Report (www.costvsvalue.com), every remodel project in their list had a better return on investment compared to the previous year. The top 5 mid-range projects in terms of cost recouped in 2012-2013 were:
- Entry door replacement (steel)
- Deck addition (wood)
- Garage door replacement
- Minor kitchen remodel
- Window replacement (wood)
You can see the entire Cost vs. Value report here. Construction prices are still lower than before the recession, which means that if home prices rise in 2013, the return on investment for remodel projects could continue to improve.
© 2012 Hanley Wood, LLC. Complete data from the Remodeling 2012-13 Cost vs. Value Report can be downloaded free at www.costvsvalue.com.
Are you planning to buy or sell a home, or do you know someone who is? Please call or email me - I'm never too busy to help you and the people you care about with real estate.
(What the lawyers make us say: The information in this newsletter is deemed reliable but not guaranteed. Please always consult a qualified expert before making decisions based on this content. Nothing in this article is meant to be taken as expert legal, financial, or medical advice.)