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Housing Recovery is Contagious

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Housing Recovery

Housing Recovery is Contagious - This time of year there are many stomach bugs, flu viruses, and other medical ailments that are passed around from person-to-person. Nobody looks forward to being under the weather, so many Americans get the flu vaccine, wash their hands, and do whatever the can to fight off germs.

But there's one kind of fever that nobody is fighting against. It's spreading quickly and has lots of consumers excited – especially those who are looking to buy or sell a house.

It's called housing fever!

Unlike the medical field (where a fever indicates that a patient is unhealthy), when housing fever arises, it signifies that the real estate industry is taking steps towards recovery. Right now, we’re seeing classic signs of housing fever.

According to the data released last week by the National Association of Home Builders (NAHB), the housing recovery is contagious and has gone viral across the country. Of the 361 metro markets tracked by the NAHB, 259 are now listed as “improving”. That's up from 242 markets in January, so an additional 17 markets have caught housing fever in the past month alone.

How are those markets studied, though?

The NAHB index takes several factors into consideration, including employment growth, home price appreciation, and the number of single-family housing permits issued in each local market. So, according to their calculations, the number of housing markets listed as “improving” has increased for six straight months, and all 50 states now have at least one improving metro area.

“Today, the story is about how widespread the recovery has become as conditions steadily improve in markets nationwide,” said NAHB chief economist David Crowe in a news release.

What is causing housing fever to spread so quickly, and how do you know if you're local real estate industry has caught the bug?

Analysts say there are many (positive) symptoms, including increases in new and existing home sales, rising home prices, and fewer distressed properties like foreclosures and short sales on the market. If you see these symptoms in your neighborhood, you’ll know that there’s an increase in consumer confidence – meaning that there will be an increase in the number of prospective buyers that want to purchase a home.

Right now, in many parts of the country, the number of interested buyers continues to rise, but the inventory of available homes for sale continues to drop off. That's mostly because of the decline in the number of foreclosures, so many markets are now experiencing a severe lack of inventory. And that's when the principle of supply and demand kicks in.

The result? Sellers raise their prices. And, in many cities, the lack of inventory has taken those rising prices one step further – to bidding wars. That means homeowners are getting even more than they imagined for their homes. It’s a completely different scenario from the last few years, when many sellers had to reduce their asking prices several times before they could attract a willing buyer.

Mortgage interest rates continue to hover near record lows, and investors continue to purchase as many homes as possible in hopes of selling them for a profit in the future as the housing market continues to improve.

When all of this occurs, economics diagnose a market as having caught housing fever!
 


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