Fresno CA Real Estate Sales And Property Management

By H&H Real Estate Media in Blog.

Looking Ahead In 2013


The New Year has finally arrived and the fiscal cliff was narrowly avoided (for now). Last year brought many landmark events, including one of the most highly anticipated elections in history. Now, many are looking ahead to what 2013 holds for our economy with the real estate market at the forefront. There have been various reports of slow improvement in the housing market in 2012, yet no earth-shattering rise has taken place. With foreclosures and short sales still frequenting the market, unemployment holding steady and the economy still sluggish, the real estate auction industry is predicting they will remain a strong presence in the upcoming year.

In 2012, we saw the auction method of sale rise in popularity across the board of all types of real estate – from luxury homes to commercial properties, the accelerated marketing plan that real estate auctions utilize has proven to be both appealing and lucrative to sellers while providing once-in-a-lifetime opportunities to buyers.

Speculation for 2013 tends to be that we will see much of the same incremental progress in both residential and commercial real estate, as Forbes recent forecast for next year details. “The housing market will improve moderately in 2013, but nobody will mistake this for a boom. The gains in activity and prices will be a welcome relief, but will leave many homeowners still underwater,” Forbes reports. “Foreclosures, short sales, shadow inventory, upside-down mortgages are all symptoms. The fundamental problem is that we have is an excess supply of housing units… [For commercial] the high vacancy rates that are a legacy of the recession will limit new construction through 2013 at least… The real boost in activity is likely in 2014 or 2015, depending on the market area. Nationally, more of the gain will occur in 2015 than earlier.”

Experts in the real estate auction field echo these conjectures. “I think in terms of next year and property values, if you have that A class property today and you want to sell it, you probably want to sell it because the low cap rates and the high demands for those types of assets will not continue. It’s an aberration,” says Evan Gladstone, Founder and Executive Managing Director of NRC Realty & Capital Advisors in Chicago. “On the other side are the majority of the kinds of properties that go to auction. The expectation that in 2013 you’re going to obtain a substantially higher price than today is probably not a great bet… We’re not seeing any factors or any drivers in the marketplace that are going to change it.”

The remaining high unemployment rate obviously plays a major role, with scores of unoccupied commercial buildings on the already-crowded market due to companies closing down. “Vacant commercial land and vacant industrial and retail locations that are functionally obsolete will be the hardest hit segment of the market,” Barry Baker, founder and owner of Ohio Real Estate Auctions, comments. “In some MSAs that have been hard hit by industry pulling out, there will be a major shift in true market value of those properties. ‘Appraisal’ prices by the county will remain high even though some properties may actually have a zero value because of carrying costs and back taxes owed. There will continue to be a steady stream of commercial and residential foreclosures due to job loss and a weak economy.”

The high rate of inventory is a key factor in what is driving sellers in all sects to place their properties on the auction block. With the promise of making a sale within 30 days at a sometimes surprisingly fair price, those with high carrying costs of unwanted real estate see the auction method of sale as their golden ticket to liquidity.

Those in residential and luxury real estate auctions are well aware of influx of clients over the past few years. Craig King, President of J.P. King Auction Company, is planning on more business in the upcoming year. “We expect to see an increase in luxury property auctions,” King states. “The perception that auctions are only for those that ‘have’ to sell is dissipating, and more of the wealthiest Americans are seeing it as the most viable way to sell their properties. For us, inquiries have been up about 50% over the past 18 months, and these inquiries are tomorrow’s sellers.”

Laura Brady, President of Concierge Auctions which specializes in luxury properties, has seen the same success in her organization. “I believe the number of luxury properties sold via auction will continue to increase for the near future and will remain constant even after market stabilization,” Brady says. “When the market reaches a constant absorption rate, the process will continue as a stronghold for savvy sellers of unique, one-of-a-kind properties who understand that the auction platform is the best way to maximize value for incomparable assets… an increasing number of high-end sellers are beginning to consider our process from the onset of offering their property for sale.”

Multi-family properties, while one of the few hot sellers in 2012, may possibly hit a standstill in 2013. With rent prices at an all-time high, many in search of housing are more likely to seek buying options, especially with interest rates at a historic low. “Rents have risen so much that owning is becoming cheaper than renting in many cities,” Forbes reports. “Add in the expectation of price appreciation and we’ll soon see renters itching to buy their own homes. Times will not be hard for landlords, but they should not project further gains beyond what they secured in 2012.”

Other factors to consider for the 2013 market include the continued economic uncertainty in Europe, another potential ‘fiscal cliff’ in March, and the ongoing unemployment dilemma. It’s still way too early to tell if 2013 will be the year that gets the U.S. back on track – hopefully we’re at least headed in the right direction.