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Housing market still on the mend

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June 25th, 2013
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It has been a good year for the housing market. Since spring 2012, home prices have continued on a steady upward trajectory, and based on the latest numbers, they re holding course. According to a new report from online real estate marketplace Zillow (zillow.com), home value appreciations have posted their sixth consecutive month of gains, exceeding 5% in April 2013. Indeed, the housing market hasn t seen prices move at this rate since June 2004. We re in a very good pattern at the moment, says Zillow s chief economist Stan Humphries. Home price appreciation is doing much better than many people expected at this point. Following the burst of the housing bubble, market prices plummeted and continued to fall through 2011, when they stabilized. In 2012 five years after the initial crash analysts started to see signs of improvement. A slow but sure rise in home prices gradually gave way to a drop both in home foreclosures and the number of Americans underwater on their mortgages known as negative equity. Though some economists initially expected market values to plateau, they continued to rise throughout the year and into 2013. As of late April, nearly every one of the 30 major metropolitan markets surveyed posted year-over-year price gains, with some cities yielding astronomical percentages. Los Angeles, for instance, saw housing prices jump 17.9% in the last year; San Francisco, 24.8%; and Phoenix, Az., 25.5%.

Positive signal

As for the bigger economic picture, Humphries says that these numbers signal a healthier recovery. Typically, housing has been the sector that s pulled the economy out of recessions, but since 2009, housing has actually contributed very little to the recovery, he explains. Lately, however, we ve seen a change. Today, the improving economic picture is increasingly a function of housing, which is very reassuring. The most recent consumer confidence index is at a six-year high, bolstered largely by the improved housing market.

Renewed interest in buying

Homeowners previously reluctant to part with cash on large improvement projects are beginning to hire contractors. Likewise, prospective homeowners, spurred by record-low interest rates, are looking to buy. Of course, Humphries is quick to point out that the meteoric rise in home prices will eventually slow, yet only moderately. Between now and April 2014, he predicts appreciations at a rate of about 4%. This number, he says, will likely jump to 5% or even 6% percent between 2015 and 2016. This recovery has been slow going, he reminds people, but all signs seem to be pointing up. I expect things to stay that way.michael.williams@erickson.com

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