At this time of the year, it it traditional to share predictions on what is ahead for the coming year. Here is a synopsis of what the experts in real estate are saying about 2013, in general, and my thoughts about our local market. After all, since all real estate is local that's probably the forecast you're looking for anyway. Let me see, I have a crystal ball in here somewhere . . . . .
I usually start with the real estate forecaster-in-chief, National Association of Realtors' Chief Economist, Dr. Lawrence Yun. He was recently interviewed following his address to Realtors at this year's National Association of Realtors Conference in Orlando.
He said that the housing market is recovering at a decent pace with real estate revenue expected to rise about 15 percent next year. That statistic gloms together an expected rise in prices and volume. In the short term, he sees a slight pullback with many homeowners still underwater in their mortgages and young people struggling with large student loans unable to participate as first-time home buyers. Cautiously optimistic would be my characterization of his forecast.
According to many of the real estate pundits this year's 6 percent national increase in prices is likely to continue next year, and with housing starts on the rise the rest of the gains should be made up in volume of new and existing housing sales. Housing starts are projected to reach 944,000 in the first quarter of the new year and then rise to 973,000 by the second quarter, according to a recent Barclays 2013 housing outlook report.
The report states that "new-home inventories have fallen to their lowest levels ever, as home builders have held housing starts below even the depressed pace of new-home sales in recent years. Now that new- and existing-home sales are on sustained upward trends, new-home inventories have fallen enough that builders need to raise housing starts to prevent inventories from falling further."
I'm sure as you travel around Greenwich these days you're seeing an increase in the tear-down-and-replace-with-larger-home phenomenon. You'll also see additions and face lifts. I'm seeing a lot of copper gutters going up replacing aluminum gutters and spoke to a local installer who says his business is booming. It might seem tangential to you but it's a strong buy signal for me.
The three big issues holding back a housing recovery in my opinion are low appraisal values due to comparable sales of distressed housing, stringent lending regulations by local and national banks worried about banking audits, and the lack of employment and salary growth.
The first issue, low appraisals, will work itself out over time as higher sales prices work their way into the mix. More realistic underwriting standards for mortgage loans will take some policy and regulation changes that may happen next year. The lack of strong employment and salary growth is my biggest concern, however, since that will require an upturn in the economy much larger than we've seen so far.
My forecast for Greenwich is, like Lawrence's, cautiously optimistic. I anticipate a continuation of the increases in volume we've seen over the last two years in the Greenwich market and moderately increased prices, maybe in the range of three to five percent.
Wall Street and the rest of the financial sector's gains usually translate into higher demand and prices in Greenwich. We've seen a 25 percent rise in the financial markets and that gives me more confidence in our own local recovery. Here's to a strong and prosperous New Year!
While I've given my best advice as of December 20, the date of this writing, it may all be for nought since the end of the world is supposed to come tomorrow. I do hope you're reading this and that the predictions of our demise, therefore, are false. Hooray for us! (When's the next one coming?)
This Week's Success Quote
"Expect the best. Prepare for the worst. Capitalize on what comes." - Hilary Hinton (Zig) Ziglar, motivational speaker
Ken Edwards is the principal Broker for Edwards & Associates and has lived in town since 1974. All opinions expressed in this column are entirely his own and not those of this publisher. Comments, questions and suggestions may be sent to K_W_Edwards@Yahoo.com or call or text him at (203) 918-4444. Questions of general interest will be addressed in this column while others will receive individual responses.