In 2012, we saw the continuation of the housing recovery in California with solid sales volume and price increases throughout much of the state. In addition, many were helped via loan modifications and short sales from being underwater on their homes.
Several have said that this recovery is artificial. There is no question that government intervention played a major role and will most likely continue for the foreseeable future. The biggest change in 2012 was the dramatic decline in foreclosure sales. Per ForeclosureRadar.com, over the past 12 months, notices of default plunged nearly 50 percent year after year, foreclosures sales fell 27.7 percent, and REO inventories declined 34.9 percent during that same period.
For 2013, Realtors largely expect more of the same. Demand will remain strong thanks to low interest rates and affordability. Available homes will remain limited largely due to foreclosure intervention via government programs. Prices will rise but constrained by appraisals, via lack of comps, and bidding wars beyond recent sales. This practice will continue to make it difficult for first time home buyers.
The National Mortgage Settlement Program, the Home Affordable Modification Program, and the California Homeowner Bill of Rights legislation that goes into effect Jan.1, 2013, will all continue to put downward pressure on foreclosures and foreclosure inventory.
Foreclosures have been a significant source of supply since 2008 and their continued decline will hurt sales volume in 2013. Short sales will likely increase as a result. Banks benefit from short sales over foreclosures including faster disposition, better recovery of value, less political opposition, and reduced risk of homeowner lawsuits. However, if the tax exemption established under the Mortgage Forgiveness Debt Relief Act of 2007 does not get extended past its expiration date of Dec. 31, this too will affect some homeowner’s decision to short sale.
We still face a number of risks in 2013: the so-called fiscal cliff will be resulting in higher taxes, the Middle East continues to be highly volatile, and the Eurozone debt crisis continues to make headlines.
Despite these risks, we are still optimistic regarding housing in 2013. Fewer people will be underwater by year’s end and housing will prove to be a safer investment for your money than elsewhere.
Mike Mason, broker/owner of Mason Real Estate can be reached at (951) 296-8887.