Light at the End of the Tunnel – And This Time It’s Not a Train
Is the nation’s six year housing slump coming to an end?
Yes, say two recently-released reports that track residential home prices across the United States.
The reports, one private, one from the federal government, point to a home market that may have seen its worse days behind it.
First the feds, where the Federal Housing Finance Agency reported a 4.4% increase in home prices from September of 2011 to September of 2012, based on data they collected from single-family homes that have mortgages backed by either Fannie Mae or Freddie Mac.
CoreLogic meanwhile, reports that in October, home prices increase 6.5% from the previous October. This marks the largest jump in home values since the summer of 2006.
The recovery seems to be wide-spread, says CoreLogic, with 45 of the 50 states seeing housing gains. Tops among them is Arizona. The state, which many consider to be ground zero in the housing bust, has experienced an impressive 21.3% increase in home values year-over-year. Other states seeing double-digit appreciation include Hawaii, Idaho, hard-hit Nevada, and North Dakota, which has been helped by massive hiring due to the region’s oil and gas boom.
Record-low mortgage rates may be attracting home buyers who have spent the past few years licking their financial wounds, sitting on homeownership sideline in a rental property. That, along with a reduction in inventory, is helping market prices.
Not so fast, says Radar Logic, who argues that the increases represent somewhat of a false recovery. Their housing report credits the rise in home prices due to a decreasing number of distressed sales. A decrease in the lower-valued REO properties does not translate into “significant appreciating in household-owned homes,” says Radar Logic. They also point to a report by LPS, which indicates that approximately 5.3 million properties are either in pre-sale foreclosure, or close to it, meaning this potential pipeline of inventory will put downward pressure on values heading into 2013.
In addition, 10% of the country (five states), saw prices depreciated year-over-year from October 2011. The dragging states include Illinois, (leading the way with a negative 2.6% depreciation in value), Delaware, Rhode Island, New Jersey, and Alabama.
Yet even as they argue the causes behind the housing gains, Radar Logic acknowledges the gain in values, year-over-year. Of course, with concerns over impending government regulations, new taxes, and worries about a potential fiscal cliff, one can never be sure of the future; however with home prices rising anywhere from 4% to 6% last year nationally, with 45 states seeing appreciation, it is likely the country has seen the bottom of the real estate market.