What’s Really Driving the Rise in Home Prices?
The Wall Street Journal recently cited five significant factors behind the rise in home prices, as numerous markets see significant year-over-year gains. The big price drives are:
1. The rise in housing affordability – which is drawing more buyers out into the market who are looking to cash in on low mortgage rates and fallen home prices compared to a few years ago.
2. The rise in household formation – which is expected to hit 1 million new households this year. That is up from an average of 570,000 over the last five years, according to data by Bank of America Merrill Lynch.
3. The rise in rents – which has prompted more investors to purchase properties to rent out and more renters to second-guess why they are paying so much in rent when they could buy.
4. The decline in distressed sales and foreclosures – which has fallen significantly this past year. While distressed sales are still high by historical standards, they have fallen from their peaks in most markets, helping to alleviate the downward pressure on home prices in many areas.
5. Inventories of homes for-sale are at their lowest levels in nearly 50 years – and builders have cut back on construction and many home owners are waiting to sell until they can recover some equity on their properties.
Source: “Five Reasons Home Prices Have Been Rising,” The Wall Street Journal (Nov. 27, 2012)
Here in Massachusetts as of the end of October 2012 we are seeing unit sales of combined Single Family, Condo and Multi-family homes UP 19.4% to 54,248 units with a Median Sale Price UP 2.1% to $288,000. Our unit sales are much higher than the National Numbers currently up 11% year over year, however we are not experiencing the same rate of pricing gain. Nationally at the end of October prices are up about 11%. This could be due to the fact that Massachusetts was not hit quite as hard as the rest of the country and has traditionally maintained pricing stability due to our highly desired location.
Authored By:
Ron Carpenito– Real Estate Consultant / Owner
Ron Carpenito on Google+
