January 2, 2013 By (Edit)
Once again, all signs point to a housing recovery. Following the pattern of housing construction starts and rising demand, home prices jumped to values not seen in three years. According to the most recent quarterly reports, home prices jumped 3.6 percent from the previous quarter.
One of the factors contributing to the reinvigorated housing market includes improved jobs numbers, with unemployment falling 1.2 percent over the last 24 months. Experts also attribute the nascent housing recovery to record low mortgage rates, which compel more homeowners to refinance, freeing up cash just in time for the holiday shopping frenzy.
Across the country, 17 of 20 cities saw home price gains compared to this time last year. Phoenix led the price jump with home prices growing more than 20 percent annually.
“With six months of consistently rising home prices, it is safe to say that we are now in the midst of a recovery in the housing market,” Blitzer said.
Even though home prices seem to be improving nationally, some cities are left out. Compared to last year, home prices in New York and Chicago declined 1.5 and 2.3 percent, respectively. Home price levels in Atlanta remained the same year-over-year.
With the news of improved housing prices, economists are saying that the housing industry will recover at a sustainable rate, unlike the skyrocketing housing market of the 90s and early 2000s. “All the signs point toward a continued housing recovery,” says Rick Sharga, executive vice president of Carrington Mortgage Holdings in Santa Ana, Calif. “Pending sales are up, existing sales are up, along with housing starts, and home prices are down.”
However, experts warn that the economy is one catastrophic event away from spiraling back into declining housing numbers. One such event specifically mentioned is the looming fiscal cliff crisis. Three factors in the fiscal cliff debate could implode the housing recovery: the expiration of the mortgage tax deduction, the expiration of the mortgage debt relief exemption, and the capital gains tax on families earning more than $250,000.
These new taxes could freeze up extra cash, turning away potential and second-time homebuyers. They could also fuel more foreclosures for families already struggling to make mortgage payments, besides adding unanticipated tax bills come January.
Despite the looming financial storm, economists expect Congress to reach some sort of patchwork agreement to prevent the aforementioned taxes from stalling the housing recovery. All signs point to a continued recovery in 2013.
Particularly for areas hardest hit by the 2008 housing crash, improving home prices indicate a more stable real estate market, similar to that seen in 2003. “Home price gains are becoming more widespread across cities, and some of the largest rebounds have been in areas that were most heavily affected during the initial housing slump,” said Barclays Capital’s Cooper Howes. “We expect this trend to persist into next year as part of a broad-based housing recovery that includes starts, sales, and prices.”