WASHINGTON (MarketWatch) — U.S. home prices rose in September for the sixth month, signaling that the housing market is “in the midst of a recovery,” according to the S&P/Case-Shiller home-price index released Tuesday. The S&P/Case-Shiller 20-city composite posted a 0.3% increase in September following a 0.8% gain in August. Home prices are up 3% from the prior year. “We are entering the seasonally weak part of the year. Despite the seasons, housing continues to improve,” said David Blitzer, chairman of the index committee at S&P Dow Jones Indices. Among the 20 cities tracked by the index, 13 posted monthly gains in September. Tuesday’s report on home prices is the latest news on a strengthening housing market. There have also been recent gains in new construction, home-builder sentiment, and existing-home sales. However, while persistently low mortgage rates are attracting some buyers, consumers still face tight credit standards, and officials say factors such as tight lending terms will block a powerful housing recovery. Indeed, despite recent gains, prices are about 30% below peak levels in 2006, according to Case-Shiller data
Posts Tagged Real estate pricing
The long-battered housing market is finally starting to get back on its feet. But some experts believe it could soon become another housing boom.
Signs of recovery have been evident in the recent pick ups in home prices, home sales and construction. Foreclosures are also down and the Federal Reserve has acted to push mortgage rates near record lows.
But while many economists believe this emerging housing recovery will produce only slow and modest improvement in home prices, construction and jobs, others believe the rebound will be much stronger.
Barclays Capital put out a report recently forecasting that home prices, which fell by more than a third after the housing bubble burst in 2007, could be back to peak levels as soon as 2015.
“In our view, the housing market had undergone a dramatic over-correction during the prior five years, resulting in pent-up demand for housing purchases that would spark a rapid rise in housing starts,” said Stephen Kim, an analyst with Barclays, in a note to clients.
In addition to what Kim sees as a big rebound in building, he’s bullish on home prices, expecting rises of 5% to 7.5% a year.
Construction is expected to be even stronger, with numerous experts forecasting home construction to grow by at least 20% a year for each of the next two years. Some believe building could be back near the pre-bubble average of about 1.5 million new homes a year by 2016, about double the 750,000 homes expected this year.
“We think the recovery is for real this time around,” said Rick Palacios, senior analyst with John Burns Real Estate Consulting. “If you look across the U.S. economy right now, there are only a handful of industries looking at 20-30% growth over the next 4-5 years, and housing is one of those.”
“That turn in the [housing] market is occurring now and it should become a boom by 2015. It will be powerful enough … to lift the entire U.S. economy,” said Roger Altman, chairman of Evercore Partners and former deputy Treasury secretary, in a column for the Financial Times.
Altman said he expects housing will add 4 million jobs to the economy over the next five years, as pent-up demand for home purchases drives building and and home prices higher.
By Ruth Mantell
I just returned from the NAR Convention in Orlando. I was representing the VBR in my role as Chair-Elect. I felt the overall tone was much more optimistic than last year. There are many areas in the country where sales are significantly up year-over-year and these markets are also seeing significant price increases. As you all know, we tend to trail the pack but hopefully we will see some similar activity in the Valley.
Here are some bullet points from the presentation by Lawrence Yun, Chief Economist for NAR. He was relatively optimistic regarding the national housing market but doesn’t seem to have much confidence in the government in making the right moves to address inflation, which he considers inevitable.
- He sees no inflation 2013 but 4 to 6% annually by 2015. The key factors that are driving inflation higher are:
- Rents are going up across the country making home purchases much more attractive but also negatively impacting inflation.
- The Fed is more concerned with unemployment than inflation.
- The Fed’s Qualitative easing program will cause inflation (historically, whenever a country prints money, inflation rises).
- Budget deficits will cause inflation because more parties are competing in the lending marketplace.
- Inflation will cause higher borrowing costs for the government increasing the deficit, which in turn will increase inflation, which will increase the deficit…………………..
- Inflation will increase mortgage rates. They will probably stay low for 3-6 more months but they should start to increase by the middle of next year.
- Home prices will appreciate 15% over next 3 years nationally.
- The Unemployment rate may have dropped slightly over the past few years but the Employment rate (the actual number of employed persons) has remained flat since 2009.
- The US will need to create 250,000/mo for 8 years to get back to where we were before the great recession.
- There will be more unequal wealth distribution because home prices are now appreciating and renters will be left behind.
Housing affordability conditions have reached the highest level since record keeping began in 1970, according to the National Association of Realtors®.
NAR’s Housing Affordability Index rose to a record high 206.1 in January, based on the relationship between median home price, median family income and average mortgage interest rate. The higher the index, the greater the household purchasing power.
An index of 100 is defined as the point where a median-income household has exactly enough income to qualify for the purchase of a median-priced existing single-family home, assuming a 20 percent downpayment and 25 percent of gross income devoted to mortgage principal and interest payments. For first-time buyers making small downpayments, the affordability levels are relatively lower.
NAR President Moe Veissi, broker-owner of Veissi & Associates Inc., in Miami, said this latest data underscores buyer opportunities in today’s market. “This is the first time the housing affordability index has broken the two hundred mark, meaning the typical family has roughly double the income needed to purchase a median-priced home,” he said. “For buyers who can qualify for a mortgage, now is a very good time to become a homeowner.”
NAR projects the affordability index for all of 2012 will be at an annual high, with little movement in mortgage interest rates or home prices during the year. “Housing inventory levels have declined to a point where conditions are becoming much more balanced in much of the country,” Veissi said. “If access to credit improves, we could see a much more meaningful increase in home sales and broader stabilization in home prices with modest gains in areas with stronger job growth.”
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.