Thursday, February 16, 2017

Hip hip hooray! U.S. home prices rush past pre-recession 2006 peak levels.

Some time in September of 2016, the United States housing market blew past a key measure of home values, proving that the dreaded economic recession that started in 2008 is behind us. It was that month when the average sold home in the United States surpassed the previous peak set in 2016.

According to official reports, the median existing-home price in the U.S. reached $236,400 in September 2016. That mark for all home sales was significantly higher than the previous peak of $230,400 we experienced in July of 2006 – more than a decade ago.

Our current $236,400 median home price was also up 6.5 from just a year earlier for the same month in 2015.

In other key measures, For Sale properties stayed on the market for only 34 days this summer (June), which was the lowest Days-On-Market on record since the National Association of Realtors began tracking that statistic in May 2011. In fact, 47 percent of all homes on the market sold in less than a month during June of 2016, according to NAR.

It’s even more good news for sellers of a non-distressed home, as those were snatched up in a median of only 33 days, while short sales (129 days) and foreclosures (39 days) lagged.

Speaking of distressed sales, short sales, foreclosures and other bank-owned properties constituted just 8 percent of sales this past summer, down from 11 percent the year prior. All-cash sales – another key indicator of a fledgling housing market and distressed sale volume – dropped to just 22 percent of all home purchase transactions, which was down 10 points from 32 percent a year ago.

According to Lawrence Yun, chief economist at the National Association of Realtors, last year’s spring home buying season was the strongest on record since before the financial crash and recession.

"Buyers have come back in force, leading to the strongest past two months in sales since early 2007," said Yun. "This wave of demand is being fueled by a year-plus of steady job growth and an improving economy that's giving more households the financial wherewithal and incentive to buy."

Yun seems spot-on when he points to economic trends – not just a hot seasonal spring market – that are driving home prices. In fact, total sales of single-family homes, townhomes, condo, and co-ops jumped 3.2 percent during June, to a seasonally adjusted rate of 5.49 million – almost 10 percent higher than the previous year.

The growth in the U.S. real estate and housing market has largely come in the last half decade, not incrementally since 2006.

“A lot of that recovery has come in the last four years as the economy has strengthened and created more higher-paying jobs,” stated Taimur Khan, senior research analyst at Knight Frank, the firm that first produced the report on median home values jumping higher than 2006 levels.

But what we’re experiencing with higher home prices may also be attributed to a case of the rising real estate tide lifting all boats. While sales showed the highest pace since February 2007 across the entire U.S, with all major regions moving higher in June, there are still certain markets that are red-hot, bolstering the median price numbers.

In fact, NAR’s president, Chris Polychron, points to “drastic imbalances of supply compared to buyer demand in several metro areas, most notably in the West.”

The biggest home price pushes have been in the most expensive metro areas like San Francisco, San Jose, Los Angeles, and even Sacramento, dragging up the national average with them.

However, the economic recovery and home prices are not quite as rosy in other areas of the country. According to Realtor.com‘s chief economist, Jonathan Smoke, median home prices still haven’t reached pre-2006 levels in 35 of the country’s largest metro areas, including Stockton, Ca, Las Vegas, Phoenix, and some parts of Florida.

Smoke also points to the fact that home prices may be on the steady rise nationally, but haven't "recovered on a real or inflation-adjusted basis." Due to inflation, a home sold for $1 in 2006 is really $1.20 these days, Smoke illustrates, so home prices may be a little less hot than they first appear, not really catching 2006 levels.

Despite this caution, home values continue to be bolstered by a fundamental economic principle of (lack of) supply and demand. In fact, the number of homes for sale across the U.S. sits at near historically low levels, with only 2.30 million existing homes for sale, with housing inventory only 0.4 percent higher than a year ago.

 “When the right type of single-family house in the right area comes to market, people want to buy that home because they might not get that opportunity again,” adds Taimur Khan of Knight Frank. No matter how you look at it, the fact that home prices have jumped above pre-recession levels is an encouraging sign – and presents grand opportunity for home sellers in the Sacramento and Northern California region


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