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What’s Next for Housing? Trends You Need to Know Now

The housing recovery continues nationwide. Economic health and historically low mortgage rates continue to drive mortgage applications. Prices inch upward in every major city.

Consumer credit

Nationally, consumer credit default rates overall, including mortgage default rates, declined in February. The default rates for all loan types were lower in February than one year earlier. Consumer credit quality is healthy.

Foreclosures

Foreclosures are not all behind us. Foreclosure activity in the first quarter of 2013 is up 9 percent over the first quarter of 2012, but down 32 percent from its peak in 2010. The increase reflects 26 states that showed increases in annual foreclosure activity; 24 states showed a decrease. Foreclosures affect middle- and lower-income households most significantly. 90 percent of homes entering foreclosure in the first quarter of 2013 were priced under $400,000; 60 percent were priced under $200,000.

Home prices

Home prices continue to rise. January saw the best year-over-year gain – over 8 percent – in home prices since 2006. Phoenix posted a gain of more than 23 percent in the same time period. Sales and prices continued to rise in February.

Despite gains, the 20-city composite is still 30 percent below its peak. Although every city in the composite continues to rise from recent lows, Phoenix remains 44 percent below its peak average home price, and Las Vegas remains 55 percent down. Denver and Dallas, however, are a mere 4.4 and 4.7 percent, respectively, below their peak levels.

Home sales

The number of pending home sales slipped early this year due to low inventory. Owner-occupied purchases rose sharply. Sales of vacation homes were also up, indicating more favorable economic conditions overall. Investors continue to purchase high numbers of homes, but at a slower rate than what we saw in 2011. The median vacation home price was $150,000 and the median investment home price was $115,000 – both up from the year earlier.  Median income tends to be high for both vacation home and investment home buyers ($86,000 to $92,000), and down payments tend to be large (27 percent, on average).

The homes selling fastest boast more storage space, and mother-in-law suites or apartments.

Hispanics currently lead the surge in home buying and account for 51 percent of the total net increase (693,000 in 2012) of owner households. Hispanics also make up the fastest-growing group of first-time home buyers. The number of Hispanics who own their homes grew to 6.7 million in 2012 from 4.2 million in 2000.

Predictions

Fannie Mae officials predict that existing-home sales will rise 10.5 percent this year; new single family home sales will grow 15 percent this year and a whopping 44 percent in 2014. Fannie Mae also expects home prices to continue to rise.

Mortgage rates will remain low for the year, but are expected to rise to 4 percent near the end of the year. The end of 2014 will likely see rates rise to 4.5 percent.

See more at the National Association of Realtors and the S&P Dow Jones Indices.

 

Please credit “Kimberly Rotter for Credit Sesame” when quoting from or linking to this story.  

Image credit: Joan Sadler

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