2013 Housing Market Outlook

Freddie Mac released its December U.S. Economic and Housing Outlook today, with projections for the nation's housing market in 2013. As property values continue to strengthen in 2013, Freddie Mac expects U.S. house price indexes to rise by 2-3%. For the first half of 2013, long-term mortgage rates should remain near their record lows, which is good news to buyers struggling with low inventory and multiple offer situations. These buyers should still have some time to take advantage of low interest rates, as Freddie Mac expects long-term fixed-rate mortgage rates to remain below 4% next year. Finally, it projects mortgage refinancing to continue to grow in early 2013, but will eventually drop down from 2012 highs.

Record Real Estate Highs and Lows

Nationwide home prices are on the rise, posting the largest % gain in over two years. According to the S&P/Case-Shiller index, the third quarter 3.6% increase year over year is the biggest jump in house prices since early 2010. In addition, home prices have increased for six consecutive months. The Wall Street Journal credits several factors for continued price increases, including an increase in rents, a decrease in foreclosures and distressed sales, and the lowest housing inventory in nearly 50 years.

Meanwhile, mortgage rates continue to fall, reaching new record lows last week for the second consecutive week as reported by Freddie Mac. 30 year fixed rates averaged a new low of 3.31%, down from 3.98% a year ago.

Delayed financing the new norm?

In real estate, all-cash buyers are king. It's common knowledge that buyers who come in with all-cash offers can close quickly and offer the most secure deals, often beating out other offers backed by conventional financing. But with recent mortgage rates at record lows, financing has also become very appealing. So which option should you choose?

A recent phenomenon called delayed financing is becoming a common practice of affluent buyers. Instead of deciding between bringing a strong, all-cash offer and the benefit of record-low financing, buyers are choosing both. With limited inventory and competitive bidding, these buyers are coming in with strong, all-cash offers, only to turn around and secure financing as soon escrow closes. Rarely used two years ago, delayed financing is becoming very popular in >$1 million coastal housing markets. To learn more, check out this recent Wall Street Journal article.