Burns’ upbeat 2013 forecast for home buyers could go over a fiscal cliff

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John Burns of John Burns Real Estate Consulting recently based a rosy 2013 forecast for home buyers on the premise that Capital Hill’s residents will come to an agreement and prevent the economy from falling off the fiscal cliff.

However, at press time, legislators were still wrangling over a deal after returning from a few days off over the Christmas holiday. Now, it appears tumbling over the fiscal cliff is more likely than not.

If Burn’s favorable forecast doesn’t materialize, blame in on Congress for ruining would could have been a banner year for the recovering housing market – and vote the bums out at the next election.

“Assuming our leaders in DC come to some sort of agreement that keeps the economy growing and interest rates low, which seems like the most reasonable assumption, here is what will happen,” wrote Burns.

DeadlineNews.Com also added some commentary.

• Investors – Investors, especialy flippers, will continue to grow in numbers as they realize housing is the best risk-adjusted return on their money right now.

For the fourth time the Federal Housing Administration waived their anti-flipping rule. This time the waiver doesn’t deadline until 2014.

• Boomerang buyers – Similar to Bruce Norris’ prediction, foreclosed homeowners, who are currently renting homes, will be back. In Phoenix, rents are as high as $1,300 for a home that would cost only $1,000 a month in mortgage payments.

Burns says the rent-vs-buy condition is not sustainable.

The FHA and the Department of Veterans Affairs (VA) have low down payment programs with insurance premiums that push rates near 5.0 percent.

However, even with the average rate at 3.5 percent or less for the most creditworthy borrowers, payments with a 5 percent mortgage are still affordable.

• Entry-level buyersFirst-time homeowners, who have been sitting on the sidelines waiting for a sign the bottom has arrived, are beginning to realize prices are on their way up. Those buyers will soon rush to become homeowners, Burns says.

Expect more renters to move to remove the yoke of zero tax benefits that come with renting – before some of those tax benefits disappear.

• Move-down buyers – Empty-nesters and retirees, who have plenty of equity in their existing home, will buy a home that is more suitable to their current lifestyle, which may or may not include housing adult children or their aging parents, Burns forecasts.

Not all will move-down. Some will move over to a similar home in another neighborhood. Others will simply move over, perhaps even renting out their existing home to cover the cost.

Move-up buyers – The price appreciation that occurred in the last year has already lifted 1 million underwater homeowners above water. Future price appreciation will lift them even more, Burns said.

Others will begin to tap equity and pay off some of those nagging bills, to position themselves for a purchase later or guard against the impact of falling off the fiscal cliff.

About the author

DeadlineNews.Com's Publisher, Executive Editor and Founder, Broderick Perkins, was the first real estate journalist to manage a daily newspaper's online real estate section. He parlayed more than 30 years of old-school journalism into a digital real estate news service offering "News that really hits home!" -- the Silicon Valley bootstrap, DeadlineNews.Com. Network with Broderick Perkins on LinkedIn, FaceBook, Twitter, Google+ and the Bloomberg Business Exchange.

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