10 ‘Make it or Break it’ Real Estate Issues for You in 2013

Top 10 Real Estate Industry Issues in 2013- 150x150Since the housing bubble burst in 2008, most people don’t trust the real estate industry anymore. The housing market is slowly recovering, and statistics show that most Americans would buy a home in the next few years, even if they expect the prices to go up in the near future.

Prices on homes have already started to climb, with a steady increase in almost each month of 2012. National home prices have increased by over 6 percent in October last year. In California, one of the states that were the most affected by the housing market crash, more than 50 percent of the homes listed for sale received multiple offers from eager buyers. The same trend was followed by Florida and Arizona last year.

Being an industry that has just started to recover, the real estate industry still faces a lot of issues in the years to come. Here are the top 10 issues that you should be aware of:

Top 10 Industry Issues

1. An Increase in Home Prices. With builders not being able to keep up with the demand for new houses, prices for older houses will continue to increase. The construction of new homes is almost three times lower than it should be to keep up with the population increase and the recent job growth. The inventory of homes for sale is at the lowest since 2006, and economists predict a 5 percent increase in home prices for 2013.

2. An Increase in Rent Prices. The job growth will push most people, who moved in with their parents or with friends back when the economic problems started, to start looking for apartments and houses to rent. This will create a lot of demand for rentals, which will cause rent prices to increase by up to 9 percent in 2013.

3. Less Good Deals on Foreclosed Homes. Sales of foreclosed homes represented only 11 percent of all home sales in 2012, down from 28 percent in 2011, and are expected to be even lower in 2013. This happened because banks have sold many distressed home loans to companies who agreed on new terms with the borrowers, instead of foreclosing.

4. An Increase in Short Sales. Instead of dealing with an expensive and time consuming foreclosure, banks prefer that the borrowers sell their home for less than what the mortgage is worth. In many cases borrowers are not required to pay the difference, which will generate more short sales, while the number of foreclosures will diminish.

5. An Increase in First Time Home Buyers. It is predicted that the growth in demand for homes in 2013 will be caused mostly by first time home buyers.

6. Bigger Home Building Costs. Even if new constructions are at a low level right now, construction materials are at high prices. The labor costs are also high because many construction workers left the industry when the crash occurred. The demand for new homes will lead to even higher costs for new construction in 2013.

7. Property Management Increase. Foreclosed homes that have been sold to investors in the past are now entrusted to professional property management organizations to maintain and rent. The number of foreclosed homes that will be sold to investors will increase in 2013, and so will the number of property management companies needed to manage them.

8. An Increase in Mortgage Interest Rates. Current mortgage rates have been at an all-time low lately, so predictions indicate that they will only go up in 2013. However, the interest rates will only slightly increase, to an average of 4 percent.

9. Credit Requirements. In order to get approved for a mortgage loan, your credit score must be in the 760s right now, but this might change in 2013. As more and more people will buy homes, lender competition will make credit requirements much more lenient.

10. A Two-Tiered Industry. Because banks don’t give out many construction loans, the home builders will be divided into two types: large home builders with access to funds, who can handle big projects, and small to medium home builders, who depend on loans and can’t handle big projects. This will create less competition and bigger prices.

The real estate industry has suffered greatly in the last 5 years, but it’s showing signs of recovery. While the worst has passed, there are still plenty of issues that need to be resolved, but that will happen slowly over the next few years.

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