Large Home Price Gains Expected in 2013

The nation’s biggest banks are expecting large gains in home pricing in 2013.

JPMorgan Chase & Co. this week more than doubled its projection for home price gains this year to 7 percent, and expects a more than 14 percent increase through 2015. Bank of American Corp. said it expects prices to rise 8 percent this year, revised up from 4.7 percent.

The Federal Reserve’s push to purchase mortgage bonds, thereby lowering borrowing costs, combined with a short supply of homes on the market are driving home prices upward. Home prices rose 6.8 percent year over year in December, marking the biggest gain since 2006, according to the S&P/Case-Schiller index.

Foreclosure Supply Contracting

In addition to low mortgage rates, a decrease in the number of foreclosed homes is pushing prices upward. Loan modifications and efforts from legislators and courts to delay foreclosures have enabled more people to stay in their homes.

In 2012, 1.3 million homes moved into foreclosure — 30 percent less than expected. February foreclosures dropped 29 percent from the year before to the lowest level since 2007.

Mortgage Rates Rise

The average rate for a 30-year mortgage loan rose to a six-month high of 3.63 percent at the end of last week.

Improved employment numbers and consumer spending drove the increase, according to Freddie Mac.

“The economy added 236,000 new workers in February, which helped push down the unemployment rate to 7.7%,” said Freddie Mac Chief Economist Frank Nothaft . “This helped offset the effects of the payroll tax holiday expiration and led to a 1.1% increase in retail sales, which was well above the market consensus forecast.”

John Goodpaster is a loan officer at WJ Bradley Mortgage and can be reached via email at jgoodpaster@EmeryFinancial.com  

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