Home prices hit a bottom and are finally bouncing back, according to an industry report recently released.
Nationwide, home values rose 0.2% year-over-year to a median $149,300 during the second quarter, the first annual increase since 2007, real estate listing site Zillow reported. Prices were up 2.1% from the first quarter.
Even though June marked the fourth consecutive month of home value increases, overall home prices are still down almost 24% since April 2007, when Zillow began to track home values. The housing recovery is holding together despite lower-than-expected job growth.
Other home price indexes have also recorded gains lately, including the S&P/Case-Shiller home price index. In its latest release, it reported that home prices in 20 major markets rose 1.3% in April, the first monthly increase in seven months.
Zillow uses a different methodology in calculating home values than other home price indexes like Case-Shiller and the Federal Housing Finance Agency. Sales of foreclosed, bank-owned properties, for example, are not factored into Zillow’s data. Zillow does include short sales, however, which are more difficult to distinguish from conventional sales.
“Our index is geared to consumers, conventional sellers deciding whether they want to put their homes on the market,” said Humphries.
The indexes that include foreclosures in their market data show larger price declines. The peak-to-trough drop for the S&P/Case-Shiller home price index, for example, is about 34% compared with Zillow’s 24%.
Fewer than one third of the 167 metro areas Zillow surveyed recorded annual increases in home values, but the size of the price gains in these areas more than offset the losses posted by the remaining two-thirds of the markets.
In Phoenix, the biggest gainer, home values soared 12.1% year-over-year to a median of $136,200. Meanwhile, the biggest loss sustained by any of the 30 largest metro areas was in Chicago where median home values fell 5.8% to $158,600.
Foreclosures remain one of the biggest risks to the housing market recovery, Humphries said. In the wake of the national foreclosure settlement which clarified how banks can legally pursue foreclosures, Humphries expects the pace of foreclosures to pick up. “That will translate to more homes on the market,” he said. “But we think demand will rise to absorb that.”
Due to advances such as Hydraulic fracturing & horizontal drilling, North Dakota is now only second to Texas in the amount of oil produced.
This has meant a consistent increase in home prices and is now leading to a shortage of housing. Local markets, especially in the western part of the state, are booming due to increased oil production in the Bakken Formation.
And that’s creating a dire need for everything from new housing to commercial development.
It’s not uncommon for some workers who have migrated to the area for employment to sleep in modest accommodations called “crew camps,” or even in cars. For them, the sacrifice is worth it: The average wage in the oil- and gas-extraction industry was $89,020 in 2011, well above the statewide average of $40,914, according to the North Dakota Petroleum Council.
While some are content with their temporary living arrangement, others who head to the Bakken are seeking a new career and life — and a place to live.
Over the last 10 years the number of properties on the market has dwindled and prices are much higher. In 2002, a 1,800-square-foot home in Williston cost in the $80,000 range, he said. Today, a comparable 2,000-square-foot home built in 1978 is listed for $327,000. Rent on a two-bedroom apartment in 2002 would have averaged $340 a month whereas today developers are proposing to charge between $1,755 & $2,700 a month.
There’s also an increased need for services in the area, and some developers are eyeing the opportunities. Many communities are struggling to keep up with growing populations in North Dakota. This is resulting in developers looking to invest in the area to provide essential services too.
In Williston alone it is estimated that there is a pent-up demand for as many as 6,000 housing units. And other areas such as Minot has seen an increase in population from 38,000 to 46,000 over the last 2 ½ years. The average price of a single family residence in this area has risen from $125,000 in 2008 to $246,000 currently.
The town’s housing shortage was compounded by last year’s devastating flood in the area, in which 4,100 homes were lost. About 2,000 homes are scheduled to be built by the end of this year, and apartment and hotel projects are also underway. Of course, not everyone is flocking to the area to invest, the biggest question investors ask is whether this oil boom is here to stay. Plus, environmentalists and others say the new drilling technology can have negative effects on the environment, including effects on an area’s groundwater.
But right now, none of that is changing the fact that there are more than 200 oil rigs operating in the state, and each active rig provides about 120 direct and indirect jobs, according to the North Dakota Petroleum Council.
There are now convincing figures to prove that nearly seven years since the housing bubble burst that house prices are rising.
Nearly 10% more existing homes were sold in May than in the same month a year earlier, many purchased by investors who plan to rent them for now and sell them later, an important sign of an inflection point. In something of a surprise, the inventory of existing homes for sale has fallen close to the normal level of six months’ worth despite all the foreclosed homes that lenders own. The fraction of homes that are vacant is at its lowest level since 2006.
The reduced inventory of unsold homes is key, says Mark Fleming, chief economist at CoreLogic, a housing data-analysis firm. For the past couple of years, house prices have risen in the spring and then slumped; the declining supply of houses for sale is reason to believe that won’t happen again this year, he says.
Builders began work on 26% more single-family homes in May 2012 than May 2011. The stock of unsold newly built homes is also down.
Economists aren’t always right, but on this at least they agree: A new Wall Street Journal survey of forecasters found 44 believe the housing market has reached its bottom; only three don’t.
Housing has been one of the biggest causes of economic weakness but the upturn in housing is a milestone. From here on, housing is unlikely to drag the U.S. economy down further. It will instead reflect the strength or weakness of the overall economy: The more jobs, the more confident Americans are about keeping their jobs, the more they are willing to buy houses.
Plenty could go wrong. The biggest threat is a large shadow inventory of unsold homes, homes which owners won’t put on the market because they are underwater, homes that will be foreclosed eventually and homes owned by lenders. They have been trickling onto the market, slowed in part by government efforts to delay foreclosures; a flood could reverse the recent rise in prices. Or the still-dysfunctional mortgage market could get worse. Or overly zealous regulators or a post-election change in government policy could unsettle mortgage lenders or home buyers.
But the housing bust is over.
Record tight inventories are making it increasingly difficult for growing numbers of buyers, who are creating multiple-bid environments in markets that haven’t seen buyers battle over homes in six years.
The problem is buyers are back but sellers aren’t resulting in buyers fighting over whats available, especially in Western markets recovering from large volumes of foreclosures. Prices are reported to be on the uptrend with 62 percent of REALTORS® reporting constant or increasing prices compared to the same time a year ago.
Buyer demand is reported to be growing faster than supply, and many REALTORS® are reporting multiple offers.
Buyer traffic is still well above the moderate level, but seller traffic is flat, according to the NAR survey. First-time homebuyers accounted for 34 percent of total buyers. Normally first-time buyers are in the neighborhood of 40 percent of total residential sales, according to NAR’s Profile of Home Buyers and Sellers.
Multiple bids are changing the playing field in a number of markets this spring and summer. Many agents new to the business who have little experience with them are dealing with a sudden and unexpected competition for homes brought about by investors.
In the 1990’s multiple offers were the norm and offered sellers a generous selection of offers from which to choose. This trend is now returning with sellers experiencing multiple offers even in this still difficult market and there is evidence that this trend will continue as buyers compete in a market with limited inventory.
In Seattle, multiple offers on beginner houses in Seattle are common again reports Phil Leng of Kirkland, Wash. and in Austin, broker Gwynn Teal Carpenter reports, “It’s happened again! We are in one of those real estate markets where we are seeing homes with multiple offers. In Austin Texas, the market is so sizzling hot that it isn’t unusual to have more than 2 offers on a fantastic priced and conditioned home.”
The economy is being seriously affected by all these factors.
Evidence shows that the US job market has slowed down in the last few months with 80,000 jobs added in June. Although the economy is adding jobs, it is not enough to bring down unemployment substantially.
The second factor, housing is improving for the first time in years with home sales being much stronger last month as well as prices starting to slowly rise. In time this will support economic growth and potentially could affect job growth too.
Unfortunately the economic problems in Europe continue to drag down the US manufacturing sector as well as other world economies such as China & Brazil. All that can be hoped for is continued measures to buy time in order to allow their economies to rebound.
The final factor Oil is a significant positive factor, with oil prices down 20% it has the potential to stimulate the economy even further.
Taking all these factors into account the general outlook is positive. Although the economy in Europe has a negative effect, the positives of Housing, Oil and Jobs can only be a good thing for the future of the US Economy.