December 6, 2012

Five years and 16 million foreclosures after the 2008 housing crash, most Americans have not lost faith in real estate. In a survey this summer of more than 2,000 adults by home buyer website Trulia, 61 percent of respondents predicted that prices in their local market would rise next year, 58 percent thought prices would take 10 years or less to get back to their pre-crash peak, and almost 80 percent of current renters said they plan to buy a home someday.

Whether or not that enthusiasm has merit, the signs of a turnaround are hard to ignore. National home prices have been on the uptick for eight straight months and jumped 6.3 percent year-over-year in October – the largest increase since June 2006, according to CoreLogic. In California, one of the hardest-hit states, 57 percent of homes for sale have attracted multiple offers this year. Bidding wars on houses are making a comeback in Florida, and in Phoenix, realtor Marge Peck says that “everything under $150,000 sells in a heartbeat.”

Will that pattern hold in 2013? To find out, we talked to real estate economists and insiders and reviewed industry reports that assess next year’s outlook. Most experts said their predictions depend on the mainstream forecasts of economic growth next year being correct and assume that the economy won’t experience an earthquake from falling off the fiscal cliff. Others emphasized that all markets are local—real estate conditions in coastal metro areas vary wildly from those in mid-sized Midwestern towns. Those caveats aside, here are 10 real estate trends they forecast for next year.

1. Rising home prices. The slow pace of new-home construction is pushing prices up, a pattern that will continue in 2012, according to several sources. Calvin Schnure, an economist at the National Association of Real Estate Investment Trusts, says construction of new homes and apartments needs to be between 1.25 and 1.5 million a year just to keep up with population growth. But since the housing crash, new construction has been at 500,000 units or fewer for 6 years running—that’s actually created a shortfall in available homes. A National Association of Realtors (NAR) report in October showed a 5.4 months’ inventory of homes for sale at the current pace, 22 percent below where it was a year ago and the lowest inventory since February 2006. (A 6-month inventory is generally considered the sign of a healthy market).