Image courtesy of PWC

PWCs Emerging Trends in Real Estate 2013 reports that investors will be chief among drivers of this burgeoning economic recovery as they struggle to improve yields, although many will remain frustrated as they achieve only modest gains at best. This will prove especially true in the commercial sector, where “decent though relatively disappointing” job creation, together with limited inventory, should bolster absorption and consequently reduce vacancy rates even further, making these kinds of properties more attractive.

This commercial real estate activity will also ripple through to other market segments, including the housing market. Single family home values are expected to inch up across the country as the foreclosure crisis finally comes to a conclusion and investors help to firm up markets by buying up remaining inventory in the hardest hit areas. PWC points to the fact that at some point, the US’s expanding population – amounting to two-to-three million annually – will inevitably lead to more demand for single family homes, and any upsurge here would likely ripple through the rest of the economy. As such, it’s likely that homebuilders will finally begin to see some action, something that we have already seen signs of after years of in activity.

However, Emerging Trends warns that the US real estate industry still has many issues to overcome, such as the inevitable rise in mortgage interest rates expected this year, and resolving ongoing loan-legacy problems in light of the coming wave of maturing commercial mortgage gains expected in the next three years.

Emerging housing trends this summer - ddpavumba / FreeDigitalPhotos.net

Intense Competition

Housing affordability has never been so high, thanks to super-low mortgage rates and steadily declining home values. As such, more buyers are emerging out of the woods to take advantage of the situation – and all of a sudden, there’s a lot of intense competition where there was none.

Investors especially, are muscling on to the scene in growing numbers, tempting sellers with their all-cash deals, which means that those needing to finance a deal are facing stiffer competition than they’ve had to deal with in quite a while.

According to Jed Smith, MD of Quantitative Research at the NAR, the circumstances have never been as encouraging for investors as they are now:

“Rents are going up, and as long as there are properties at the level where investors can get the positive cash flow, they will continue to invest.”

For first-time buyers especially, the competition for the best deals on the market is going to be a lot tougher this summer, adds Smith.

Homeownership Becomes More Desirable

One of the quirks of the housing market at present is that homeownership these days is for many people, more affordable than renting a home. Due to this, growing numbers of renters are beginning to desire a home of their own.

We can already see signs of this – according to a survey by Kingsley Associates, just 59.5% of tenants are planning to renew the lease on their home, the lowest number recorded since the beginning of 2009.

Mortgage Costs Increase

Despite home affordability remaining at record lows overall, some home buyers are seeing a slight increase in their mortgages. Fannie and Freddie, and the FHA have all increased their loan fees in recent weeks, and these costs will be passed on to homeowners.

Ed Conarchy of Cherry Creek Mortgage, Gurnee, Illinois, states that this will be a problem for buyers who lack high credit ratings, as they’ll be forced to take an FHA loan, leaving themselves stuck with the increased fees.

FHA mortgage premiums have gone up to 1.75% of the total loan amount, and so those buyers who can only afford a small down payment can expect slightly higher premiums with an FHA mortgage.

In addition, borrowers with more expensive mortgages can also expect to pay increased premiums soon. Starting in June, the FHA is going to raise its annual insurance costs for mortgages valued over $625,000.

Source: Bankrate, Inc.