Is it time to buy?

Experts Expect to See Broad Improvements, Home Prices to Rise in 2013

03/28/2012 By: Esther Cho

The Urban Land Institute released its Real Estate Consensus Forecast Wednesday morning, and overall, the 38 real estate economists and analysts surveyed projected broad improvements for the economy.

 

With signs of improvement in the housing sector already emerging, the institute expects to see housing starts nearly double by 2014 and projects home prices will begin to rise in 2013.

The average home price, which has declined somewhere between 1.8 percent and 4.1 percent over each of the past three years, according toFHFA data, is expected to stabilize in 2012, followed by a 2 percent increase in 2013, and a 3.5 percent increase in 2014.  Single-family housing starts are expected to rise from 428,600 starts in 2011 to 500,000 in 2012, and jump to 800,000 in 2014.

The unemployment rate is expected to continue falling, with the rate dropping to 8 percent by the end of 2012, 7.5 percent by the end of 2013, and 6.9 percent by the end of 2014. GDP is expected to grow by 2.5 percent in 2012 and grow to 3.2 percent in 2014.

But, with the improving economy is inflation and higher interest rates. These rising rates will increase costs for investors, and those surveyed do not expect substantial increases in real estate capitalization rates for institutional-quality investments (NCREIF cap rates), which are expected to remain steady at 6 percent in 2012 and 2013 and then rise slightly to 6.2 percent in 2014.

ULI CEO Patrick L. Phillips advised that while theULI Forecast suggests that economic growth will be steady rather than sporadic, it must be viewed within the context of numerous risk factors such as the continuing impact of Europe’s debt crisis; the impact of the upcoming presidential election in the U.S. and major elections overseas; and the complexities of tighter financial regulations in the U.S. and abroad.

“While geopolitical and global economic events could change the forecast going forward, what we see in this survey is confidence that the U.S. real estate economy has weathered the brunt of the recent financial storm and is poised for significant improvement over the next three years.,” said Phillips.

Combine the above with the Fed keeping mortgage interest rates historically low for the near term, with an intermediate to long term horizon on your housing needs…it may just be the time to jump back in.

 

Thanks for reading…Steve Jackson

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