Rates drop below 3.50 percent for thirty year mortgages. Online real estate tool Trulia has successful IPO and stocks jumped 30 percent after offering. Ben Bernanke, via Federal Reserve, has taken extraordinary measures to stimulate the economy through quantitative easing 3 measures that will mostly benefit the real estate recovery for the next three years.
All signs say housing is at the beginning of a progressive housing recovery. Many indicators (see below) illustrate a potential housing supply shortage, increased affordability, paradoxically rising home prices increase, and expanding housing markets.
Two Year High For Pending Home Sales
The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 2.4 percent to 101.7 in July from 99.3 in June and is 12.4 percent above July 2011 when it was 90.5. The data reflect contracts but not closings.
Three Year Trends
Lawrence Yun , NAR chief economist, said the index is at the highest level since April 2010, which was shortly before the closing deadline for the home buyer tax credit. “While the month-to-month movement has been uneven, more importantly we now have 15 consecutive months of year-over-year gains in contract activity,” Yun said.
Limited inventory is constraining market activity. “All regions saw monthly increases in home-buying activity except for the West, which is now experiencing an acute inventory shortage,” Yun added.
Existing-home sales are projected to rise 8 to 9 percent in 2012, followed by another 7 to 8 percent gain in 2013. Home prices are expected to increase 10 percent cumulatively over the next two years.
“Falling visible and shadow inventories point toward continuing price gains. Expected gains in housing starts of 25 to 30 percent this year, and nearly 50 percent in 2013, are insufficient to meet the growing housing demand,” Yun said.
Home Price Increases Highest In Six Years
Three different sources confirm sustained annual home price increase.
CoreLogic’s July’s Home Price Index (HPI®) reflected the largest annual housing sales increase since 2006. A 3.8 percent annual increase from July 2011 to July 2012. The nationwide home price increase accounted for all house sales. The July 2012 figures mark the fifth consecutive increase in home prices nationally on both a year-over-year and month-over-month basis.
National Association of REALTORS®’ existing-home sales index as well as the S&P/Case-Shiller Home Price index showed national home prices up from a year ago.
Mark Fleming, chief economist for CoreLogic.
The housing market continues its positive trajectory with significant price gains in July and our expectation of a further increase in August. While the pace of growth is moderating as we transition to the off-season for home buying, we expect a positive gain in price levels for the full year.
Anand Nallathambi, president and CEO of CoreLogic.
It’s been six years since the housing market last experienced the gains that we saw in July, with indications the summer will finish up on a strong note. Although we expect some slowing in price gains over the balance of 2012, we are clearly seeing the light at the end of a very long tunnel.
Rising Home Prices But Still More Affordable
National Association of REALTORS®’ existing-home sales index showed a 9.4 percent median price increase for existing homes sold from a year ago (data released late August). On first inspection, this would seem to make housing less affordable. The Affordable Housing Index points to another conclusion.
In May the Housing Affordability Index rose to a record high of 205.9 in first quarter. July 2011 the rate was 178.0 and July 2012 the index had still maintained a high affordability rating of 182.0. At 182.0, the HAI shows that a household’s income is 82 percent higher than what lenders would need to qualify for a typical home loan.
Affordability levels are historically high rates (HAI started in 1970)… this year was the first time the Housing Affordability Index broke 200. How can a median house increase of 9.4 percent still leave the Housing Affordability Index this high?
While prices are up compared to one year ago, mortgage rates are nearly a percentage point lower and incomes are up, though only modestly. Since the Housing Affordability Index factors in the effect of house prices AND income and mortgage rates, it is the case that nationally, the median priced home is slightly more affordable to the median income family than it was a year ago.
Metro Housing Market Improves Again September Index Increase
More metro housing markets are expanding and increased the number of housing permits, employment, and home prices. In September, the National Association of Home Builders/First American Improving Markets Index improved by twenty-four percent, rising from 80 to 99 improving metro areas.
Is This A Sign Of A Housing Recovery?
The number of metro areas showing signs of real estate market improvement expanded in September, rising from 80 to 99 metro areas, according to The National Association of Home Builders/First American Improving Markets Index.
Barry Ruenberg, chairman of the National Association of Home Builders, on why he feels the index has risen for the six consecutive month:
“This solid growth is an encouraging sign that housing continues on a slow but steady recovery path that is gradually advancing from one local market to the next.”
NAHB Chief Economist David Crowe on new home purchases:
“More metros across the country are experiencing a sustained uptick in house prices, employment, and new building activity as rising consumer confidence in local market conditions pushes more people to consider a new-home purchase.”