Just how much are home prices increasing these days? Maybe more than you think!
According to a report released last week by real estate data analysis firm CoreLogic, home prices around the country went up 9.7% in January, when compared to the same month the previous year. Not only is that almost a double-digit increase, but is also the biggest annual jump prices have made since April 2006!
The winter months are usually the slowest for home sales, but January marked the 11th consecutive monthly increase. In fact, the number of home sales around the country went up 8.3% from November to December, and another 0.7% from December to January.
CoreLogic predicts a slight dropoff in sales from January to February, but those numbers won't be available for another couple of weeks. But even if the number of sales goes down a little bit, they expect the prices to keep going up. Specifically, they anticipate a 9.7% increase in the year-to-year growth when comparing February 2013 to the same month a year ago.
“With these gains, the housing market is poised to enter the spring selling season on sound footing,” CoreLogic chief economist Mark Fleming said in a statement that accompanied the report.
So, why are home prices the highest they've been in almost 7 years?
For one, there is a lack of inventory available right now, and economists think that buyers are getting nervous that they may be missing out on a good time to buy a home. So, more prospective homebuyers are checking out what's available and bidding on homes that are still within their price range.
A decline in the number of foreclosures has also helped home prices go up. During the housing crisis, the market was flooded with distressed properties. They not only over-saturated the market, but lowered home values, because those properties are sold so far below market value. At the height of the housing crisis, about 33% of all of the homes for sale were foreclosures. Now, though, only about 20% of the homes for sale are foreclosures. That’s still a big chunk, but certainly much lower than it had been!
Now that the housing markets in most states are seeing fewer foreclosures, their home prices can go up, thanks to the simple rules of supply and demand. When there were a lot of foreclosures on the market, the glut of distressed homes drove down prices. Not only were they listed at lower prices, but there were far more homes for sale than there were people interested in or capable of buying them.
Because there were so many bargains to be had, investors started buying these properties. The foreclosures started to clear out, and average consumers began to have more confidence in the economy, prompting them to go house hunting again. Now, it has become a seller's market in many parts of the country, there are more people interested in buying a home than there are homes currently listed for sale. When the demand goes up, so do home prices!
Some analysts worry that there may be more foreclosures headed our way because many states have instituted policies that make it difficult and more timely to process a foreclosure. Once those properties make their way through the court systems, housing markets in states like Maryland, New York, New Jersey, Florida, and the District of Columbia may be flooded with foreclosures once again. Experts can only speculate how long that will take in each state, and aren't sure how it will affect the markets once it happens.
For now, though, they are focusing on only one thing – the fact that home prices are continuing to rise!
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