by Tim McLaughlin, Sr. Vice President, Weichert Financial
Home price appreciation is accelerating in much of the U.S., offering the latest confirmation that the housing market is turning after the most severe property downturn since the Great Depression.
Prices rose by 8.1% in January from a year earlier, the largest such gain in 6 plus years, according to figures from the S&P/Case-Shiller index of home prices in 20 major metropolitan cities released Tuesday.
Prices also defied their usual winter slowdown and rose 0.1% in January from December, a period when prices often fall because sales activity is slow. After adjusting for seasonal factors, prices gained 1% from December.
Housing demand is revving up at a time when the number of homes for sale has fallen to the lowest level in decades. Low mortgage rates also are helping homeowners who can qualify for a mortgage take on more debt without a big increase in their monthly payment.
Supply shortages have developed in a growing number of markets where many homeowners are either unwilling or unable to sell because they have experienced sharp price declines. And home builders, long sidelined by competition from bank owned foreclosures, have added little new construction. Inventory also has been whittled down as investors convert homes into rental properties.
When the year began, many economists and analysts expected prices to rise at a slower pace than in 2012. But the conditions that produced last year’s run-up (low inventories, a growing economy, strong investor demand and low mortgage rates) are “stronger than last year, and last year was strong,” according to Mike Simonsen, chief executive of Altos Research, a real estate analytics firm based in Mountain View, Calif.
Economists at Morgan Stanley now expect prices to gain 6%-8% this year, up from an earlier forecast of 4%-6%. Lawrence Yun, chief economist at the National Association of Realtors, raised his forecast to 7% from 4% because he expects inventory shortages will persist.
Mr. Simonsen said those predictions could be too low and is expecting a 10% gain. The market is “crazy hot right now.”
