The housing market in 2012, while making steady steps toward recovery, is still under halfway to a full recovery, according to Trulia’s Housing Barometer. In October, the Barometer showed the market was 47% back to normal, and another Trulia device, the Price Monitor, revealed earlier this year in March that asking prices were on the rise. 

But despite indicators from these instruments that housing is on the upswing, 2013 might carry a different tune for the market as new regulations and budget cuts threaten to make homeownership more expensive, reports Trulia’s Chief Economist Jed Kolko in a Forbes article. 

Outlining the Ins and Outs for housing in 2012 and 2013, Kolko proposes five aspects to consider for housing’s future and the effects of possible changes as the market continues its path toward a full recovery.

What’s “in” for 2013 includes whether inventories will bottom, new mortgage rules, declining housing affordability, cutting the mortgage interest tax deduction, and localized housing policy. 

The effects of rising home prices can have various impacts on builders, buyers and sellers alike, as they will encourage new construction, give greater incentives for homeowners to sell, and offer a wider selection of homes to choose from, writes Kolko. 

The focus of housing policy in 2013, Kolko believes, will have to be trying to prevent future crises rather than dealing with the last one. 

New mortgage rules to be announced by the Consumer Financial Protection Bureau (CFPB) in January will define which mortgages are judged to be beyond borrowers’ capabilities to repay loans. These new rules will determine the rigidity of mortgage credit for potential home buyers. 

A decline in housing affordability looks to be in the works for 2013, expects Kolko, as home prices are rising faster than rents in many large markets. Rising mortgage rates are expected next year as the economy strengthens, reducing affordability and putting homeownership out of reach for households in expensive marketplaces. 

Smaller, localized improvements within the industry have contributed to much of housing’s recovery efforts, which is why it is a sign of returning to normalcy that the national housing crisis is becoming a range of “diverse, localized housing challenges,” notes Kolko. Given this, Kolko believes housing policy will cater more to local issues, rather than being constrained by political gridlock in Washington. 

Read the full article from Forbes here.

Written by Jason Oliva