The average home price in the United States is projected to increase in 2013, due to the rising number of home sales and once record low mortgage rates.
Home buyers need to keep in mind that mortgage rates are back on the rise. That’s right- In its annual mortgage rate forecast, the MBA projects that the 30-year fixed will rise to 4.40% within the next 12 months. This is more than an entire percentage point higher than today’s mortgage rates; a shift that would severely damage buyer purchasing power, and that may end the longest Refinance Boom in recent history.
J.P. Morgan Chase & Co. expects U.S. home prices to rise 3.4% in its base-case estimate and up to 9.7% in its most extreme scenario of economic growth. Standard & Poor’s, which rates private-issue mortgage bonds, last week said it expects a 5% rise in 2013.
The J.P. Morgan analysts boosted their base-case estimate from 1.5% after a convincing rise in the “net demand” for housing this year has surpassed 2 million homes for the first time since 2006, said John Sim, a strategist at the investment bank.
What does this mean for home buyers? Buying sooner can save you $$$! Also, buying new is the recommended investment due to greater resale value. By purchasing a new home or custom build, the buyer is sure to get a great ROI, especially if the home is in a moderate demand location with a good school district.
U.S. home prices nationwide increased on a year-over-year basis by 6.3% in October, the biggest increase since June 2006, according to CoreLogic. Investors zoning in on the increases bought subprime mortgage bonds, which have posted returns of more than 40% since December. By the end of the third quarter of 2012 the FHA accounted for 13% of national mortgage volume, down from a peak of 30% in 4Q08, yet “well above pre-crisis levels,” analysts note.
The median price for existing homes in the U.S. jumped by almost $14,000, to $185,000, according to Clear Capital, a provider of real estate data and analysis.
The WSJ’s Nick Timiraos makes an amusing comment on Twitter: “All these analysts forecasting monster home price gains were forecasting moderate declines a few months ago.”
Mortgage bonds issued by Fannie Mae, Freddie Mac and Ginnie Mae still fund more than 90% of new home loans. Bank portfolios and other private lending make up the rest.
The expectations for higher home prices are still widespread. Nearly three-quarters of investors polled by J.P. Morgan expect home prices to rise 5% in 2013.