by Tim McLaughlin, Sr. Vice President, Weichert Financial
Home prices notched their strongest year to date gains since 2005, climbing 5.9% through July and signaling the housing market’s steady trudge toward recovery.
The rising prices in Tuesday’s Standard & Poor’s/Case-Shiller 20 City index could play a pivotal role in changing consumer sentiment toward housing and drawing in buyers from the sidelines. Another lure: Mortgage rates are falling to record lows after the Federal Reserve resumed buying mortgage backed securities two weeks ago (via QE III), helping to offset rising prices.
“Housing is no longer a negative. It is turning positive and we see the data reflecting that,” said Ivy Zelman, chief executive at research firm Zelman & Associates.
Home prices typically are strongest in the summer, the busiest season for home sales, before declining later in the year. But the 5.9% rise far surpasses the 0.4% gain seen through the same period last year and the 2.0% gain in 2010.
For the broader economy, the turn in housing could provide a much needed boost if it continues. Rising prices could eventually lift consumer spending if homeowners begin to feel wealthier again. Housing construction, a big generator of jobs, also has the potential to play a major role in economic growth.
Rising prices largely reflect a dwindling number of foreclosed homes being sold by banks and other lenders as well as stronger demand for those properties from investors. Foreclosures and other “distressed” homes typically sell at larger discounts, and with fewer of those properties selling, prices are under less pressure.
But rising demand, especially at the low end, is putting upward pressure on prices as traditional buyers, as opposed to investors, feel more confident about jumping into the market.
Nationally, prices were up 1.2% from July 2011, the largest year-over-year gain since home-buyer tax credits fueled a burst of sales two years ago.
Looking to take advantage of this market uptick before home prices potentially rally higher, combined with historically low interest rates? We can help! Speak to your dedicated team of expert professionals; your Weichert Realtor and your Weichert Financial Gold Services Manager. They can help put you in the house of your dreams today!