All the news since January, 2013 has forecasted and has actually seen an increase in home prices. In March, 2013, in an article from news.msn.com headlined “US Home Prices Rise At Fastest Pace in 7 years”. Home prices rose 9.7% in January from a year ago. Prices increased in 92 of the 100 largest metropolitan areas. The article points out that demand is up and combined this with fewer available homes on the market. The states with the biggest percentage gains were Arizona up 20.1%, Nevada up 17.4%, Idaho up 14.9%, California and Hawaii rose 14.1%. The cities with the biggest gains were Phoenix, Los Angeles, New York, Atlanta and Riverside California. Since the real estate bubble exploded in the recession, home prices were down 26% from a peak in April, 2006. The effect of home prices rising is to encourage homeowners to sell homes and would be buyers to purchase homes before prices increase.
In an article which ran in April, 2013, money.msn.com stated “February 2013 Home Prices See Best Yearly Rise in Almost 7 years”. Single family housing prices rose more than expected in February. Prices in 20 cities gained 9.3% in one year, the biggest increase since May, 2006. On an average, home prices were back to the levels they were at in the autumn of 2003. Prices are rising because all the cheap sales are gone. The homes selling at the bottom were the ones who had to sell or were bank owned. Much of the inventory in gone.
In an article in the New York Times on Wednesday, May 29, 2013, on the front page in bold print “Home Prices Rise, Putting Country in a Buying Mood, Biggest Gain in 7 Years”. The article reported the Standard and Poor’s Case-Shiller home price index posted the biggest gains in 7 years. Home prices rose in every one of the cities tracked, continuing the January trend. New and existing home sales and building permits have increased encouraging construction companies to accelerate building and hiring. This housing recovery influenced consumer confidence to a 5 year high in May, 2013. Economist state growth in the value of existing home prices, means homeowners are feeling richer and that creates a wealth effect making consumers loosen their purse strings. The twenty city composite index rose 10.9% since last year, the biggest increase since April, 2006. The cities of Charlotte, North Carolina, Los Angeles, Portland, Oregon, Seattle and Tampa, Florida had the largest month to month gains in more than 7 years.
The article points out the double digit house price increase are a result of a number of factors. Employees have added jobs for 31 straight months. This puts the working middle class back to work and those who didn’t lose their jobs are more secure in their jobs. This middle class (which is always the basis for economic growth) puts these people back into the housing market. This, plus the inventory of homes available, remains unusually low together with the Federal Reserve’s policy of keeping low mortgage interest rates.
The higher prices are beginning to encourage would be sellers to come off the sidelines and place their homes on the market. Daniel Silverman, economist at JP Morgan Chase said “that he expected home prices to continue growing but not necessarily double digit rates in May, 2013”. The new construction has picked up in response to the rise in home prices. Also pushing up the home prices are the decline of distressed sales. Foreclosures and short sales have also lowered the home prices. Now that this inventory is gone, home prices leveled off and have begun to rise. Some of the areas with the largest decline in house prices during the housing crisis have shown the greatest increases in house prices. Phoenix is up 22.5% and Las Vegas has posted a 20.6% gain. As the economy improves, more young people move out of their parents’ homes and into the housing market. They have reasons to buy now after 10 months of housing prices gain. The price index is well below the previous peak in July, 2006 which still leaves room for increase in pricing.
If you are a first time buyer or have been sitting on the sidelines until the market rose, it is time to return to the real estate market and sell that old house and buy a new home at low prices with low mortgage interest rates.
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