Home prices rose 7.5% last year, largest increase in six years, and will rise 6% in 2013, market researcher CoreLogic predicts in a report out today.
The same forces that helped propel prices last year will be in play this year, including improved housing demand fueled by good affordability, fewer foreclosed homes for sale and a low inventory of unsold homes, the company says.
Total home sales increased 6% last year, to 4.2 million, marking the first increase since 2005, CoreLogic’s data show.
The healthy jump in home prices in 2012 “was really a big surprise,” from what many economists expected earlier in the year, says Patrick Newport, IHS Global Insight economist.
Whether this year will bring an upside surprise will largely depend on economic conditions, he says. Stronger job growth would drive more housing demand as people living with friends and relatives move into their own homes, Newport says.
CoreLogic’s price gain prediction is more bullish than some others. Home prices will rise 3.1% in 2013, according to a December survey of 105 real estate experts and economists by real estate company Zillow.
Prices were helped last year by fewer distressed home sales. Sales of bank-owned homes fell more than 20% to 600,000, CoreLogic says.
Earlier last year, some real estate analysts expected a flood of foreclosed homes to hit the market after five major lenders reached a settlement over foreclosure practices with state and federal officials. That didn’t happen.
Short sales also made up more of the overall home sales last year, accounting for 23%. That’s the highest level since the real estate downturn began, CoreLogic says. A short sale is when banks allow a house to be sold for less than what’s owed on the mortgage loan.
Rising home prices should encourage more sellers to list their homes for sale, CoreLogic says. The supply of homes for sale fell to 4.8 months in November, the National Association of Realtors says. That’s the lowest level in more than seven years. Realtors consider a six-month supply to be a balanced market between buyers and sellers.