Prospects for the Fall and Winter Market:
Again, we foresee a continuing increase in existing home prices over the long term. However, there are factors that may lead to intermittent halts in price increases in the intermediate term.
The number of homeowners underwater continues to decrease. Recent months have seen a substantial improvement, with almost a 20% decline in the number of homeowners whose debt on their homes exceeds their equity. This factor alone normally would be enough to sustain a steady rise in home prices.
However, something new has been added to the mix; a steady and prolonged increase in home remodeling. Both anecdotal evidence and actual data indicate that these remodels have been done with an eye on near term sale. Near term in this case points toward Spring and Summer of 2014.
It appears the blip in the steady increase of existing home prices may occur Spring and Summer of 2014. These new remodels combined with homes whose owners have just recently seen their equity surpass their debt may produce a perfect storm effect beginning in the Spring. The number of sellers may meet or perhaps surpass the number of buyers, causing a temporary stall out in existing home price increases.
It may seem to go against common wisdom, but unless a prospective seller is willing to wait until the Spring of 2015 or even 2016, Fall and Winter of 2013 - 2014 may yield the highest prices until glut of remodeled and newly solvent homes clears it's way through the market.