8 ways the housing market has changed for 2013

1. Homes are more expensive — but not much more.

An improving economy and low interest rates have boosted buyer demand in most markets, decreasing supply and raising prices. Indeed, the national median home price increased 10.1% in November to $180,600 from the same period a year earlier, according to the National Association of Realtors. November marked the ninth consecutive month of home-price increases.

This year, the gains should be more restrained, says Alex Villacorta, director of research and analytics at Clear Capital. "2013 should be interesting for the housing market, where national gains should continue to see upward growth, but likely at a more modest growth,” he says.

Clear Capital expects prices to rise just 2.1% nationally this year. That's good news for buyers in many Western markets, including Phoenix, where prices have surged in the past year, pricing some buyers out.

Some notable exceptions to this moderation are Seattle, where Clear Capital expects prices to rise 13.5% this year, and Birmingham, Ala., with a 10% increase.

Indeed, only eight out of the 50 major markets it studied should see prices fall in 2013 — and in those areas only slightly. Those markets are St. Louis; Chicago; Baltimore; Atlanta; Philadelphia; Denver; Charlotte, N.C.; and Louisville, Ky. None of these markets is expected to drop more than 1.7%, however, according to Clear Capital.

• Realtor.com: What are homes worth near you?

• On our blog, 'Listed': Two-thirds of metro areas ranked as improving

2. Loans are getting pricier.

After bouncing along at record lows in 2012, interest rates are expected to rise slightly in 2013. Just how much is really anyone's guess. However, Greg McBride, senior financial analyst with Bankrate.com,  says he wouldn't be surprised if rates hovered between 3.5% and 4% for much of the year, barring any big changes in the overall economy.

Moreover, the costs associated with securing some loans are rising, as well. The Federal Housing Administration last spring once again increased its one-time upfront mortgage insurance premium for minimum down-payment loans (less than 5% down) to 1.75% of the loan, while raising its annual monthly premiums to 1.25%.

This year, those premiums could increase again. The Federal Housing Administration Fiscal Solvency Act of 2012 gave the FHA authority to raise premiums to as high as 2.05% annually to build and maintain its reserves, which are at record low levels. If that happens, the increase would tack an additional $133 onto the monthly payout for a $200,000 loan.

Still, McBride says he doesn't expect small increases to deter many buyers from the FHA's low down-payment loans. Many people, he says, just don't have enough cash tucked away for a conventional loan. "If you are looking at making less than a 10% down payment, your options are pretty limited."

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3. Inventory is bottoming out.

Rates are great, but not a lot of houses are for sale.

The inventory of existing homes for sale at the end of November was down 3.8% from the previous month to 2.03 million. That represents a 4.8-month supply at the current sales pace and is the lowest supply since the go-go market of fall 2005. Listed inventory is down 22.5% from a year ago, when there was a 7.1-month supply.

The problem is, prices haven't gone up enough to enable many homeowners to sell and recoup enough to put down on a move-up home. Also, the banks are funneling more of their distressed sales to investors as rental properties. (More on this ahead.)

The dearth of listings should begin to change sometime this year, analysts say, as pent-up demand, historically low interest rates and slightly higher home prices prompt more move-up buyers to list their home.

However, for the foreseeable future, if home shoppers see a desirable property, they should move quickly, because in this tight market they can be sure that someone else will. 

• Realtor.com: What homes are on the market right now?

• Video: How to buy a home

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4. A new mortgage rule will protect buyers from shady lenders.

To head off another financial crisis, the government's consumer watchdog, the Consumer Financial Protection Bureau, recently announced a new rule to ensure that prospective buyers are actually able to repay their mortgage.

The Ability to Repay rule, which officially takes effect in January 2014 but will be put into place by most lenders sometime this year, protects consumers from risky practices such as "no doc" and "interest only" features that contributed to so many people losing their home in recent years.

"When consumers sit down at the closing table, they shouldn't be set up to fail with mortgages they can't afford," CFPB Director Richard Cordray said.

The new rule, spurred by 2010's Dodd-Frank financial-reform law, requires that borrowers' financial information — employment status, income, assets and debt – be supplied and verified by lenders, thereby eliminating no- or low-doc loans.  That information, including debt-to-income ratio, must be used to prove that the borrower has the ability to pay back a loan.

Generally, the bureau says these mortgage rules will allow people with a debt-to-income ratio of less than or equal to 43% to get a loan.

Moreover, the rule says that banks can't use teaser rates to mask the true cost of a mortgage. Lenders must evaluate the consumer's ability to repay the principal and interest over the long term, not just for the introductory rate. 

Lenders complying with the requirements of the rule (PDF) will issue a "qualified mortgage," which also ensures that the loan has no excessive points or fees, or toxic loan features, such as terms of more than 30 years, interest-only or balloon payments, or negative amortization payments where the principal amount increases.

• On our blog, 'Listed': New federal rule: Make sure borrower can pay loan

5. Home-equity loans are back.

Low mortgage rates may have stolen all the headlines last year, but rates on home-equity loans have been falling, too, making those long-overdue home remodels more attractive to people who have been in their house for some time.

"With home prices stabilizing, you will see more lenders competing for home equity business," McBride says.

The average rate on a fixed-rate home-equity loan fell to 6% in early January from 6.3% at the beginning of November, according to Bankrate.com. That average ran as high as 8.5% during the financial crisis in 2009.

Why did these loans get so pricey? Home-equity loans became much riskier for lenders in recent years, as home values declined and huge waves of people began defaulting on their mortgage. Equity lenders get paid only after the primary mortgage lender gets its money, so many lenders were taking losses on these loans as distressed-property sales failed to recoup enough to satisfy these second liens. Many got out of this business, McBride says.

Now, however, with home values rising, more lenders are willing to make these loans.

The question for most people looking to remodel is, do they need a home-equity loan, or could they just refinance for more than they owe? With rates on a 30-year-fixed loan hovering near 3.2% in January, why pay the higher rate associated with a home-equity loan or variable-rate home-equity line of credit?

The answer to that question depends on when you last refinanced and how long you need the money. Home-equity loans carry lower fees than a refinance, making them a good short-term option.  It's just good to know that homeowners once again have options.

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6. There are fewer distressed-home bargains to buy.

The mortgage crisis is starting to fade into memory, and so are those cheap foreclosure deals.  While the number of distressed homes is still fairly high at 2.3 million units, according to CoreLogic, fewer of these homes are getting a for-sale shingle.

One reason: Almost half of those 2.3 million homes are still seriously delinquent but haven't been taken back by the bank because of a backlog in processing.

"I honestly thought the next wave would be short sales," says Kim Drusch, an agent with Century 21 Award in San Diego. "But the banks are giving new opportunities to distressed homeowners to stay in their properties. They are even offering principal reductions to their loan balances as opposed to going the short-sale route."

Moreover, a large number of the properties being repossessed by lenders are being sold off in portfolios to investors, rather than listed for individual buyers. When they make it back onto the market with a little face lift, they aren't such a bargain anymore.

In addition, many portfolios of single-family bank-owned homes are being auctioned as rental properties. These big portfolios of homes are attracting the big guns, including national real-estate investment trusts (or REITs) that are expected to buy tens of thousands of properties over the next several years.

That's great news for sellers, who have seen their neighborhood property values hammered by bargain-basement bank sales. But it's meant rising prices for buyers as inventory has dwindled.

• On our blog, 'Listed': Shadow inventory keeps shrinking

• Realtor.com: What are homes worth near you?

7. More new construction is coming.

Existing homes are in short supply, but there will soon be many more new homes to add to the mix.

While housing starts fell slightly in November on delays related to superstorm Sandy, the number of building permits for new single-family homes and condominiums rose 3.6% from the previous month alone and a whopping 27% from the same time last year.

Record-low interest rates and an uptick in hiring spurred the increased activity by builders. New-home sales are up 15.3% over the past year, hitting an annual rate of 377,000 in November, according to Census Bureau data.

After years of building inactivity and a dearth of turn-key homes on the market, many buyers are welcoming the chance to buy new and have it their way.

New-home prices, however are moving up faster than prices for existing homes. The median price of a new home in the U.S. rose to $246,200 in November, a 15% increase from the previous year. Greater supply in the months ahead, however, could ease the pace of future price increases.

• On our blog, 'Listed': Existing-home sales at highest level in 3 years

• Realtor.com: What are homes worth near you?

• Video: What hurricanes can teach us about home construction

8. The luxury market suffers a hangover.  

Sales of homes over $1 million surged 51% in November, as high-net-worth owners rushed to list their existing homes and buy new ones to avoid the capital-gains tax hikes in January that were part of the fiscal-cliff deal. 

Under these changes, high-income earners would pay $88,000 less in taxes if they made a $1 million profit on their home in 2012 rather than in 2013. So, out went the for-sale signs, and down came the inventory of luxury homes in the last quarter of 2012.

Publicly traded Toll Brothers, which specializes in the luxury-home market, saw its sales contracts jump 60% in the fourth quarter from the same period last year — the highest level since the red-hot market of 2005. "We enjoyed resurgent activity across all of our product lines and in most of our geographic regions," said Douglas C. Yearley Jr., Toll Brothers' chief executive officer. "The momentum that began in our first quarter of FY 2012 built throughout the year."

However, due to the dwindling supply of luxury homes in many markets and the huge number of buyers who took the plunge last year, experts predict a bit of a slowdown in luxury-home sales during the first part of this year.

For those shopping for a high-end custom home, it means less to choose from, but also a lot less competition.  Of course, the drop-off in demand probably won't last long. More and more big-budget international buyers are continuing to invest in U.S. real estate, particularly along the coasts.

After so many years of decline, American real estate remains quite the bargain.

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Slide show:  Most expensive homes for sale