Home Values Rising
Things are heating up in the housing market. A spring awakening lifted the market from a deep slumber and the summer months are keeping the momentum going.
For the first time since 2007, the Zillow Home Value Index, a measure for home prices, climbed 0.2 percent to $149,300. This is the fourth consecutive month of increase, the company said. That’s a sign that things finally may be moving upward after hitting the absolute bottom.
But full recovery is still far away.
Of the 167 metros covered by the index, 53 reported annual increases in home values. Phoenix, one of the worst hit markets by the downturn, reported the largest increase with home values skyrocketing 12.1 percent.
“After four months with rising home values and increasingly positive forecast data, it seems clear that the country has hit a bottom in home values,” said Zillow Chief Economist Dr. Stan Humphries in a release. “The housing recovery is holding together despite lower-than-expected job growth, indicating that it has some organic strength of its own.”
But, there’s no uncorking of the champagne yet. Celebrations may still be a bit premature considering the pipeline of foreclosed inventory.
“This will translate into more homes on the market by the end of the year,” Humphries said in the release. “But we think demand will rise to absorb that, particularly in markets where there are acute inventory shortages now.”
In the next year, 67 of the 156 markets are expected to experience gains in home value, Zillow said.
Rising Prices Cools off Foreign Interest
For a while now, low prices and attractive and abundant home inventory lured buyers from offshore. But, with the market slowly picking up and some areas reporting bidding wars and multiple buyers for the same property, things are changing.
A recent report by Trulia shows that foreign interest in the U.S. housing market is tapering off. When the housing bust happened, buyers from Canada, Australia, Germany and the U.K. made a beeline for the U.S. shores, buying up investment properties in places such as Miami and Los Angeles. Year over year, foreign search of U.S. homes fell by nearly 10 percent. Searches have dropped the most in markets where prices have climbed, Trulia said. Buyers from Eurozone crisis countries have also slipped, declining 15 percent in the first half of 2012. While falling interest isn’t a positive in most cases, in this case it’s an indication that things are really improving on the housing front.
New Home Sales Drop
While existing home sales have climbed in some areas, even triggering bidding wars, new home sales plummeted. According to the Commerce Department, prices for single-family homes dropped 8.4 percent to a seasonally adjusted annual rate of 350,000 units. That’s the lowest pace in five months.
The biggest dip was in the Northeast where prices fell 60 percent.
“Housing will continue to recover gradually throughout the year but fundamentals are not supportive of a fully fledged housing market recovery,” Yelena Shulyatyeva, an economist at BNP Paribas in New York told Reuters.
Last month existing home sales also suffered a dip. Despite low mortgages, economic issues at home and abroad have prevented buyers from jumping into the real estate market. The going may be slow for awhile. But, the silver lining is, home values have risen and new home construction rose to the highest level since 2008.
Sale Agreements Drop
There were fewer contracts signed to buy existing homes last month, according to the National Association of Realtors®. According to NAR, the sale agreements index dropped 1.4 percent to 99.3. Economists consider a reading of 100 to be the sign of a healthy market.
Contract signing is an important indicator of where the industry is headed. Usually it takes one to two months from the time an agreement is signed to when a deal is completed.