We continue the 2013 predictions from Harris Real Estate University, a private organization that trains short sale agents.

3) Mortgage Interest Tax Deduction Under Attack.

The Internal Revenue Service says that only 25 percent of tax filers claim it, so it could be done away with resulting in a boon to the U.S. Treasury of $108 billion. But for many taxpayers, it’s the best tax deduction they have, although it’s available only when you itemize your deductions. In high housing cost areas it results in about a $12,000 deduction, which is more than the standard deduction of a married couple fining jointly. Some proponents of getting rid of it say it promotes mortgage debt rather than encouraging people to pay off their homes early.

4) Mortgages Will Continue To Be A Challenge.

Three major reasons:

The first is regulation under Dodd-Frank Rules governing risk retention and a borrower’s ability to repay a loan. They haven’t yet been released for 2013. Many critical measures have yet to be resolved such as what is a QRM (Qualified Residential Mortgage).

Second, because of the added expense on mortgages to comply with the Dodd-Frank Rules the cost to obtain a mortgage will increase significantly. That could double loan fees in 2013.

Finally, the appraisal industry is still in a mess. Look forward to under-appraisals in 2013 from inexperienced or out-of-the- area appraisers.

5) Rentals Will Continue To Be In-Demand. 

Until the unemployment rate falls, more families will need to continue to rent. Additionally, the past recession has created a tremendous amount of bad debt. For those who short sold their homes two or three years ago this year will be the year to buy. For most, a three-year wait will be common. However, I closed on a home a couple of months ago in Spanish Fork where the buyers had gone through a short sale just two years ago. For those who let foreclosure roll over them, they’ll have to wait a few more years to get a bank loan. Tip: seller financing could be making a come back.

Also, with the exception of FHA, VA, Utah Housing and Rural Housing loans in specific areas, down payments are generally in the 20 percent range, more than the typical homebuyer can afford. In some markets people can rent cheaper than they can buy, but in Utah County I’ve seen just the opposite as with the glee expressed with my last buyers who ended up with a house payment about equal to their rent. Check with your loan officer to see how buying fits into your budget.

6) Mortgage Delinquencies (and Defaults) Will Remain High.

The website, www.zillow.com estimates that if you are a 40-year-old homeowner you have a 50 percent chance that you are underwater with your mortgage. That leads us to the next prediction:

7) Short Sales Will SOAR In 2013. 

Why? Because short sales are the preferred solution for underwater owners and their lenders. However, Realtors are steering away from the term “expert” in marketing their short sale expertise. Fear over potential legal actions and error and omission insurance coverage nd advise from attorneys is leading brokers and agents alike to reconsider the use of the word when describing their real estate services.

8) Shadow Inventory Comes Out of Hiding. 

These are homes the banks have already taken back and not yet put on the market. Expect them to come out of hiding in 2013.

9) Banks Committing ‘Strategic Foreclosure’.

Banks are expected to foreclose faster on the homes that they know will cost them the least money, primarily in areas where the market is strongest. So, not all defaulted properties will be treated the same.

10) Housing-Haves and Have-Nots.

Nationally the recovery will continue to be uneven.  The strongest, quickest recovering housing markets will get stronger as the banks clear out the distressed homes faster. The slower housing markets will continjue to take months or even years for the banks to foreclose.

11) Owning A Home IS The American Dream.

The 2007-2008 housing crash put on ice many Americans home ownership dreams. In 2013 that ice will thaw. Many believed that the long-term trend towards ownership had been replaced by the new trend of renter-ship. What will become very clear in 2013 is that the American Dream IS Home Ownership.

12) Real Estate Industry (Brokers, Agents) Will Experience Massive Income Increases.

Income levels for many agents are predicted to return to pre-crash levels in 2013. Sales commissions will increase along with home prices. In all but the hardest hit housing markets 2013 will feel like the best housing market in 5-7 years. Think of it this way. Increased Demand for Homes + Home Appreciation + Excitement About Buying and Selling Real Estate = More Real Estate Transactions.

Expect all facets of the real estate industry to roar back to life. Most notably:

* Incomes will increase. However this time there will be a new-found sense of appreciation for the income. Gone will be the sense of income entitlement that many agents fell victim to during the real estate bubble. Still fresh on the minds of the real estate industry is what happens when you become over extended and don’t save for a rainy day.

* The National Association of Realtors (and the state associations of Realtors) will experience growth in new members not experienced in years. I don’t expect this trend to go unnoticed until late summer 2013 when it’s clear that the real estate industry is recovering faster than other aspects of the economy. Expect the ranks of Realtors to increase. Folks looking for employment will find their way into the real estate industry after having given up on trying to find a job.

Rodger L. Hardy is a Realtor affiliated with Prudential Utah Real Estate and a former real estate editor. For answers to your real estate questions please email him at rhardy@utahresidentialEteam.com.

Part 2 of a 2-part series