Excerpts from the following article:
- Home-price forecasts for 2013 are on the rise.
- J.P. Morgan Chase & Co. expects U.S. home prices to rise 3.4% in its base-case estimate and up to 9.7% in its most bullish scenario of economic growth.
- J.P. Morgan analysts boosted their base-case estimate from 1.5% after a convincing rise in the “net demand” for housing this year has surpassed 2 million homes for the first time since 2006, said John Sim, a strategist at the investment bank. Net demand is the pace of existing home sales minus the inventory of homes available for sale.
- “Net demand has picked up a lot in 2012,” said Mr. Sim. “Once you get north of the 2 million territory, you are in the positive growth area, unless you get a lot of distressed inventory, which this year hit a low point” since at least 2008, he added.
- U.S. home prices nationwide increased on a year-over-year basis by 6.3% in October, the biggest increase since June 2006, according to CoreLogic.
- Considering risks, J.P. Morgan analysts conceded that the economy is “gloomy” and tight lending standards can stop a bullish homebuyer from proceeding with a purchase. On the supply side, the “shadow inventory” of more than four million homes near or stuck in foreclosure still looms, though that is dropping, the analysts said.
- What’s more, just the uncertainty over whether politicians will be able to steer clear of the “fiscal cliff,” the scheduled tax increases and spending cuts next month, may hurt investor confidence, the J.P. Morgan analysts said.
- If taxes rise, reduced income for the potential homebuyers will damp housing demand, they added. But the expectations for higher home prices are still widespread. Nearly three-quarters of investors polled by J.P. Morgan expect home prices to rise 5% in 2013.