In an article from the WSJ, growth in home market increased as the end of the year approached. Prices increased, as the median sale price of existing homes was just under $209,000, which is up six percent from the previous year. Likewise during the third quarter prices were up by 4.8% from the previous year. Over 85% of the 175 metro areas covered in this report said their median price has increased from a year earlier. Most of the gains were seen in the areas hit hardest during the housing market downturn. The increase of prices has been seen by the increase of demand, due to the low interest rate and improving economy, and the lack of supply of homes for sale. As demand outpaces supply we are starting to see the acceleration in prices and low mortgage rates. Places that are seeing the increase are Nevada, Florida, and Illinois whiles most of those seeing a decline are the Midwest and Northeast (Missouri, Connecticut, Pennsylvania, and Wisconsin). Some of the cities within the increasing home prices are usually the smaller towns that see huge swings that vary quarter to quarter. We need to keep a close eye on the energy-rich areas of the country, namely Texas, which are clearly starting to slowdown due to the recent steep decline in oil prices. The pending sales in Houston alone were down by just over nine percent. This increase in the overall median rate is seen as a positive factor for the economy.
4 Comments
Be careful in your phrasing: “demand outpaces supply” is not commensurate with economics!!
Are prices high enough to encourage new construction? How are they relative to (say) 2006 — is it likely that many homeowners are still “underwater” on their mortgages, with (net) price below what they owe? [A housing transaction incurs fees of about 10% of the price, most paid by the seller.]
For data you can find the S&P / Case & Shiller home price index on FRED, while CoreLogic provides data on housing equity [underwater = negative equity].
I agree with Maddie’s point that it will be interesting to keep an eye on housing prices in the energy-rich areas of the US. How will the recent steep decline in oil prices affect other areas of the economy such as housing prices? I would be even more interested to see if there is any correlation between housing prices and oil prices in the Bakken region as well. Are these areas too energy dependent, or will they survive just fine?
As Professor Smitka already mentioned in his comment, I wonder if the current trend can lead to the full recovery from 2008 housing market crash. I am also curious as to why it is the area hit hardest during the crisis that are also experiencing the fastest increase in price. Are the housing prices in these areas naturally volatile? Another question I have for the future is whether FED will succeed this time in keeping the interest rate and housing price in check in order to prevent another housing market bubble.
Go to FRED for various housing sales volume, price and construction data; it would be a good followup post.
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