Tight Inventories Still Driving Home Price Gains – for Now

Tight Inventories Still Driving Home Price Gains - for NowIn many key housing markets, small inventories will continue to boost home prices in the short term, according to CoreLogic’s first-quarter report and future outlook released Thursday.
Home prices surged by 10.2 percent in the first quarter of 2013, the first double-digit gain since the peak of the housing bubble in 2006.
Prices in metro areas at the center of the housing bubble rebounded sharply, with Phoenix up 23 percent, Sacramento up 21 percent, Detroit up 18 percent and Miami up 14 percent, said CoreLogic’s Case-Shiller Indexes Report.
Price gains are projected to ease from a double-digit pace in 2014 as increasing mortgage rates and home prices decrease affordability, CoreLogic projects.
For now, extremely limited inventories in many metro areas are boosting prices.
Home prices increased year over year in 296, or 77 percent, of metropolitan areas in the first quarter of 2013. Although some metro areas are still posting year-over-year decreases, it is likely that all metro markets will post positive annual appreciation by year’s end.
“Record levels of affordability, a slowly improving job market, and very small inventories of new and existing homes for sale will continue to drive U.S. home price appreciation during the summer,” said Dr. David Stiff, chief economist for CoreLogic Case-Shiller.
The supply of active listings ranges from three months in Detroit, Phoenix and Sacramento to five and a half months in Miami. That signals a sellers’ market in these areas. As home prices rise in lagging markets, the national rate of appreciation also increases.
“We expect strong buying activity this spring will lead to stabilization of home prices in most lagging markets, resulting in rising home prices in nearly every metro area by the end of 2013,” Stiff said.

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