Sellers' Market For Now, but Home Price Surge Will Not Last

Home prices increased during the firstrnquarter of 2013 by 10.2 percent, the first double-digit quarterlyrnincrease since the “bubble” peaked seven years ago. HoweverrnCoreLogic, which issued its Case-Schiller Index report this morning,rncautioned this price surge is not going to last.</p

The company said that home prices werernup in 296 of the 384 metropolitan areas it tracks compared to thernfirst quarter of 2012 including many of the cities that were at therncenter of the housing bubble and where prices plummeted when itrnburst. Phoenix was up 23 percent, Sacramento 21 percent, and Miamirn14 percent. Even troubled Detroit showed an 18 percent annual gain. In Detroit, Phoenix and Sacramento, the months’-supply of activernlistings is approximately three months and Miami is hovering aroundrnfive and a half months. Both indicate strong sellers’ markets. </p

Core-Logic, however, said it expectsrnprice appreciation to slow to 5.6 percent between the first quarterrnof 2014 and the first quarter of 2015 as rising interest rates andrnhome prices erode affordability and inventories of new and existingrnhomes increase causing better balance between supply and demand. Asrnrising prices bring more homeowners into a positive equity positionrnmany, previously unable to do so, may decide to sell, further easingrnupward pressure on prices, slowing appreciation even further in thernout years. Over the five years beginning with the first quarter ofrn2013 prices are expected to rise an average of 4.0 percent </p

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“Record levels of affordability, a slowly improving job market,rnand very small inventories of new and existing homes for sale willrncontinue to drive U.S. home price appreciation during the summer,”rnsaid Dr. David Stiff, chief economist for CoreLogic Case-Shiller^TM.rn”Although a small number of metropolitan areas show year-over-yearrndeclines, it is likely that home prices in these cities will turnrnpositive by the end of the year.”</p

Three of the metros that experienced a small year-over-year homernprice decline are Long Island, N.Y. (-1 percent), Waukegan-Kenosha,rnIll-Wis. (-2 percent) and Poughkeepsie, N.Y. (-4 percent).</p

New home builders are ramping up as rising home prices indicaternbetter profits, but Core-Logic says building activity has increasedrnmore slowly than expected, due mostly to the uneven economicrnrecovery. As builder confidence as measured by the NationalrnAssociation of Homebuilders has recently been soaring, Core-Logicrnsays the pace of new construction is expected to increase morernrapidly.</p

“Although double-digit gains usually indicate unsustainablernappreciation and, possibly, bubbles in some metro areas, there isrnless need for concern now since home prices remain 26 percent belowrntheir peak nationally and are even lower in many metro markets,”rnsaid Dr. Stiff.

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