However, if Phoenix and the nation continue on the path we are on with steady gains in home prices, low interest rates, and rising employment then we can expect the housing market to be good for Buyers and Sellers in Phoenix for 2013, although Sellers will have an edge due to dwindling inventory.
To look forward to 2013, let’s look at what happened to the housing market in 2012
In 2012, the national housing market finally turned a corner. We’ve now experienced 13 straight months of home value appreciation. Sales were up significantly over 2011 as buyers returned to the market, boosting demand while interest rates remained low.
So what will 2013 have in store for the housing market?
Home prices will continue to rise
Homeowners looking to sell in 2013 can largely rest assured they won’t be selling at the bottom, and many will find themselves in a sellers’ market. Potential buyers in 2013 may be more motivated to get a deal done while affordability is still extremely high and mortgage rates continue to be historically low.
Location, Location, Location
The housing market recovery has remained true to the old real estate axiom of “location, location, location.” How your local market is faring today – and if it makes more sense to buy or rent, to sell now or to hold off if possible – is largely determined by unique, local factors and fundamentals. Arming yourself with timely and comprehensive local market information is good advice at any time, but will be even more important in 2013 as buyers continue to seek bargains and sellers look to maximize returns.
Buyers: According to the Zillow Breakeven Horizon, buying beats renting when staying in the home for three years or more in roughly 60 percent of U.S. metros. The areas where it might make more sense to buy (if you’re planning on staying for three-plus years) are clustered in the Southwest (the Phoenix Rental Market continues to be strong, driving up rental prices) and Southeast. If you won’t be staying put for at least a few years, consider renting in the Northeast, where buying often doesn’t make more financial sense until five years or more. The Phoenix Rental Market continues to be strong, driving up rental prices.
Sellers: A good measure to use to determine where buyers have the most leverage in a sale, and where sellers might have the upper hand is the Zillow’s Buyer/Seller Index. In general, Zillow has determined that metro areas in the West and Southwest – including the Bay Area, Las Vegas and Phoenix – are strong for sellers. Metros in the Midwest and Mid-Atlantic – places such as Chicago, Cleveland and Philadelphia – are best for buyers.
Underwater Homeowners come out from Under as the Housing Market Improves
As home values continue their upward march in 2013, more homeowners currently trapped underwater will begin to surface. This will be good for buyers exhausted by limited inventory and intense competition in markets such as Phoenix and Miami, but it will also have the effect of cooling price increases. As a result, in 2013, we predict home value appreciation in many areas will look more like a series of steps, characterized by cycles of price spikes and plateaus. Price spikes will free some homeowners from negative equity, allowing them to sell, thereby easing supply constraints and dampening prices until the cycle is repeated.
Affordability in 2013 Housing Market:
Between 1985 and 2000, Americans spent, on average, about 20 percent of their household income on mortgage payments. That percentage increased to more than 24 percent by 2006, before falling to just 13 percent by the second quarter of 2012. If you can qualify for a home loan, the combination of low rates and low prices means your home-buying dollar will continue to take you farther in 2013 than in recent years, even for buyers on modest budgets.
Mortgage Interest Deducted?
- Changes to the mortgage interest deduction (MID) may be a key element of any “grand bargain” reached by politicians in order to avert the year-end fiscal cliff. If adopted, any measure to limit or repeal the MID will result in some home price impacts over time and by market segment.
- Home values at the high end of the market will likely be more negatively impacted by MID changes than home values overall, according to a recent Zillow survey of economists. For example, in the event that the maximum MID-eligible mortgage amount is reduced from $1 million to $500,000 and the deduction allowance for second homes is eliminated, the majority of respondents said they expect high-end home prices to fall while U.S. home prices overall experience little or no price impact.
Real estate lobbying groups have long fought against changes to tax rules allowing for the deduction of mortgage interest, arguing that any changes will impact or eliminate some of the historic financial advantages of owning a home. But unless you’re buying a proportionally more expensive home or are buying in a more expensive area, the impacts of MID changes will likely be muted.
Thinking of Buying or Selling a home in 2013?
The decision to buy or sell a home is highly personal and dependent on a number of factors, only one of which is potential tax implications. In 2013, make your decision to buy or sell based on your own informed opinion and your unique situation. Seek out the advice of a Realtor who is knowledgeable in the housing market you are interested in buying or selling Real Estate.