Everyone breathed a collective sigh of relief with the recent passage of the so called Fiscal Cliff Bill, which prevented the repeal of several tax benefits that presumably would have had a negative effect on many Americans and do further damage to an already ailing economy.
From a real estate perspective we were fortunate that many of the benefits of home ownership, which were potential targets as sources of tax revenue, were largely left intact. Probably the biggest of these is the Mortgage Interest Deduction, or MID, which was not touched at all. Other notable provisions of the Bill were the extension of the Mortgage Debt Relief Act of 2007 for one year to January 1, 2014, and the extension through 2013 of the deduction of mortgage insurance premiums for tax filers making less then $110,000.
As for the local real estate market, I expect to see an overall stable market in 2013. Many areas are likely to see slight appreciation in home values year over year and interest rates are expected to remain at record lows at least through the midway point of the year.
I also expect to see the incidence of short sales and foreclosures to continue at about the same pace we saw in 2012, which in most markets will mean no negative effect on the value of non-distressed sales.
One concern that remains, however, is the availability of financing for would-be home buyers. The National Association of Realtors® (NAR) recently reported that 2012 was a record year for housing affordabilty, however, at the same time, very tight lending requirements continue to limit the number of home buyers in the marketplace. According to Ellie Mae®, as of October, the average FICO score for a denied FHA loan was 706 with an average downpayment of about 13%. If lending qualifications loosen a bit, we could see even more improvement to the real estate market in 2013.
One thing is for sure: a strong housing market is a necessity for a healthy economy. I think when all is said and done, 2013 will go down as a good year for real estate.
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