2013 Real Estate Predictions And Why:
2013 looks to be a very good year for real estate in the Bay Area. In Redwood City I am see home prices going up and days a home stays on the market going down. Inventories are low and there are pent-up demand from home buyers who have sat on the side lines for the past 3 years. The low-interest rates are very helpful for most home buyers and those homeowners who want to refinance and can qualify.
The good news is that both home sellers and home buyers will benefit from this market. Sellers will be able to take advantage of this up market and buyers will be able to take advantage of the low-interest rates and future appreciation.
JP Morgan has stated they expect home prices to jump 9.7% this year in San Francisco and the San Francisco peninsula. They think a bullish market like the Bay Area will have no problem reaching the 9.7% appreciation of home prices in 2013.
They go on further and say this is based on their base-case estimates, now at 3.4% and for other market places you will see a 5% appreciation in home prices. JP Morgan recently revised their base-case estimates from 1.5% to the 3.4% because of a strong demand by home buyers in 2012.
This “net demand” has had an upward movement since 2006. (FYI: “net demand” means – the price pace of existing home sales minus the inventory of homes available for sale, according to JP Morgan strategist, John Sim.)
“Net Demand” will continue throughout 2013 as long as banks don’t flood the market with distressed home. 2013 is the year all the loan taken out before the drop in the real estate market will be “ re-forecast”, adjusted, and there are going to be some homeowners that will be between a rock and a hard spot. Good thing values have gone up the past years so they will be able to sell and get out unscathed if they can’t refinance. The “net demand” in 2012 was 2.3M and JP Morgan thinks it will be 2.7M in 2013.
Another good reason 2013 looks good for real estate is because of the increase of home prices the past few year’s investors and home buyers the more riskier real estate assets such as the now infamous sub-prime mortgage-backed securities. Not only home prices on the rise but GREED are the driving forces behind these securities being acceptable. The return on investment is huge.
Corelogic states the year over year base home prices nationwide have gone up by 6.3% in October. This increase has caused investor to see a 40% return on their investment. This is a very good reason for buying these sub-prime mortgages–backed securities in the eyes of most investors.
Over at Credit Swisse Vice President Luke Scolastico said he is seeing this everyday. In fact, Credit Swisse is buying Jumbo (over $417K), more this month than last month, and more over the month before that. Interesting enough, these sub-prime mortgage-backed securities are being backed by Credit Swisse and not like in the past our government.
Credit Swisse expect this volume to continue and increase by 6 folds in 2013. They attribute this to 3 aspects; higher home appreciation, lower interest rates, and higher yields for investor.
If the “big boys” are bullish on real estate for 2013 I think I am too. I have always been an advocate for home-ownership as a way to give shelter for your family as well as a nest egg for your retirement years.
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