Housing Recovery Coming to a Town Near You
I know that many personal finance bloggers try to discourage almost every kind of debt, but when it comes to mortgage debt it seems Americans aren’t listening to that advice. Based on data out this month from every corner, both new home sales and existing home sales are going through the roof across America. So much so in fact, that buyers are currently looking at a shortfall in supply. In some areas, home supplies are lower than they’ve been in decades.
Kurt K. Colgan, a Sacramento area realtor, has said “In my 27 years I’ve never seen inventories this low. I’ve also never seen a market turn so quickly.” Sacramento currently has one of the largest shortfalls of available houses for sale in the nation.
It’s not just Mr. Colgan either; the housing turnaround seems to have caught nearly everyone by surprise. And even though economists have been anxiously awaiting the return of the housing market, the current rise in demand is such that prices are now rising too rapidly in some areas, even those that were experiencing declines just 6 months ago. According to Zillow.com, a real estate tracking website, the median home price in Sacramento has surged 15 percent in the past year. To put that in perspective, the median price at the beginning of 2012 was $142,900 and in February it is $165,600. Other cities with similar increases include Boston, Seattle, and Oakland.
The Standard & Poor’s Case-Shiller Home Price Index agrees. It shows that home prices increased by an average of 7.3% nationwide in 2012. Of the top 20 cities surveyed, Phoenix had the greatest gains, surging by 23%, while only New York saw a decline.
Meanwhile, bringing more supply to help mop up the demand is proving difficult. Home builders are trying to ramp up their production, but are running into difficulties as they search for workers and in obtaining building permits from overwhelmed local authorities. Exacerbating the problem is the fact that existing homeowners are waiting on the sidelines, hoping for additional price jumps and hesitant because they worry about selling and then being unable to find a new home themselves.
I know Michelle and Jefferson from SeeDebtRun recently put their house on the market. I wonder how they are faring with offers and finding a new nest of their own in the current market.
Across the U.S., the number of homes for sale is at a 13 year low according to the National Association of Realtors. That’s a huge drop and one that is going to take some time to recover from if demand keeps up the blistering pace set in February, historically one of the weakest months for home sales and purchases.
Inventories are so slow because home construction has been at a virtual standstill over the past few years. Investors have long since scooped up the many foreclosures on the market and lenders have been unwilling to offer mortgages and loans to home builders for new housing projects. Now, unemployment is dropping, the stock market is up, and consumers are more flush than they’ve been since 2007. Mortgage rates are also still at historic lows, making it even more enticing for those who now feel ready to jump into the housing market.
By all accounts it looks as if the housing upturn is here to stay, adding a needed area of support to the overall economy. Housing permits reported Tuesday rose to their highest levels since June 2008, an increase of over 30 percent versus last year. Unfortunately it will still be months before any newly constructed homes will be ready for mortgage settlement and their new families. Complicating matters is the lack of skilled construction labor after the 6 year building hiatus.
Overall though it is very encouraging news. Higher home prices, new construction beginning, job creation leading to more people with discretionary cash, all add up to a boost to the U.S. economy. And it’s a boost that we’ve been waiting over half a decade for. If you are thinking of buying a house in the next 12-24 months, you may want to consider accelerating your plans as it looks to by a sellers market for some time and prices still have nowhere to go but up in many areas of the country.
What about you? How is the housing market looking in your part of the country?