Housing Market Normalizing?
Prices Rise Most in Over 6 Years
Could the U.S. housing market finally be making a comeback? And, more importantly, could that indicate that the U.S. economy itself is finally beginning to surge back?
This January, home prices shot up 9.7 percent compared to last year’s period, and according to CoreLogic’s analyses, February should see similar increases. The January increase is actually the biggest year-over-year rise in over six years and the 11th straight monthly increase so far.
Growth was so broad that only Delaware and Illinois reported any price drops, and those were minimal—0.1 and 0.4 percent, respectively.
From USA Today:
Prices showed "strong growth during the typically slow winter season,” says Mark Fleming, Corelogic economist. "With these gains, the housing market is poised to enter the spring selling season on sound footing."
As many as 22 states experienced price increases of 6 percent or more this January compared to last year, USA Today reports. Arizona and Idaho saw particularly spectacular rises, with 20 percent and 17.4 percent increases, respectively.
Going along with this encouraging data, home price surveys also demonstrate a strong trend of increases. In fact, with all these gains, some 14 states as well as D.C. are now within 10 percent of their peaks prior to the housing market crash.
Home values across the nation are still down more than 26 percent from their April 2006 heights. Nevertheless, there is certainly cause for encouragement. For example, one metric that tracks the number of Americans who signed contracts for home purchases shows that number hit its highest level in more than 2.5 years this January. Beyond the obvious, that also means that previously-occupied homes will become more attractive on the market.
And, as Boston.com indicates, rising home prices have a domino effect. They make more homeowners encouraged about their sales prospects, which drives up the number of homes on the market, while prospective purchasers quickly notice the trend and try to grab a purchase before prices get “too high” (and “too high” is, as always, a variable concept).
The net effect of all that would be an increase in consumer confidence in the strength and stability of the general market, which in turn would stimulate consumer spending and thus ultimately raise the general level of the entire U.S. economy.
Of course, lest we forget, this is all still quite premature. The housing market within the U.S. has only been relatively stable for about a year. Before that, it was eight years of continual inflation and then the bubble burst in 2006. Since then, millions of homebuyers have gone into foreclosure and the housing market has been rather dismal.
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But a recent analysis conducted by Fiserv Inc., based on the Fiserv Case-Shiller Indexes and housing data on more than 380 domestic housing markets, suggests that—at least for this particular “boom and bust” cycle—the storm may indeed have passed.
“2012 was the first year since 1997 that the housing market has resembled something recognizable as normal. For the past 15 years, home price changes and sales volumes have either been boosted by a bubble mentality or crushed by crash psychology,” said David Stiff, chief economist, Fiserv. “Back in 1997, housing prices grew 3 percent, just below the 5 percent long-term average rate of appreciation. From 1998 to 2006, prices appreciated at levels above 5 percent, with double-digit price increases in many of those years. Then, after 2006, the market collapsed as euphoria turned to panic. It took until the end of 2011 before housing markets finally started to stabilize. The latest Case-Shiller results show a return to a historically normal pace of price appreciation in the last year.”
It’s likely, according to the study, that the end of 2013 will see home prices on the rise in just about every metro area across the nation. Between Q3 last year and Q3 this year, that rise should be about 0.6 percent, but in the year after that period, growth could be as high as 3.7 percent. And between 2012 and 2017, that growth should average about 3.3 percent, reports the International Business Times.
Meanwhile, prices for the world’s more expensive real estate properties have risen toward record highs as well, according to a Christie’s International Real Estate study. It seems much of the rise comes from a mix of inventory scarcity and high demand from wealthy individuals. London and New York, as usual, figure high on the list, but Hong Kong reports the world’s second-highest prices per square foot on average.
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