Homes prices were up nationally in 2012 from a year ago. According to the S&P/Case-Shiller Home Price Indices, home prices continued to rise in the third quarter of 2012, marking six months in a row of increases.
The national composite index was up 3.6 percent over the third quarter of 2011 and up 2.2 percent from the second quarter of 2012. Home prices have returned to their mid-2003 levels nationally, after bottoming out at around the 2001 level in 2009.
Consumer confidence in November 2012 was at its highest point in 4 1/2 years, according to the Conference Board Consumer Confidence Index. Interest rates remain at or near all-time lows at around 3.5 percent for conforming 30-year fixed-rate mortgages.
Foreclosures as a percentage of all home sales have decreased from 28 percent in October 2011 to 24 percent a year later, and nondistressed sales have increased. This has resulted in an increase in the median home price.
The median existing-home price rose 11.1 percent in October 2012 from October 2011, according to the National Association of Realtors. This was the eighth consecutive monthly year-over-year increase. Half the homes sold during a period sold for more than the median and half for less.
There have been periods of monthly year-over-year increases in median home price during the last several years. But, none have matched the length of the recent wave of increases since the period between October 2005 and May 2006, which was before the recent housing recession.
The Census Bureau reported a big increase in the annual average household formations in the 12 months ending in September 2012. Nationally, 1.15 million new households were formed, a little under the long-term average of 1.25 household formations a year. But, this was significantly more than the annual average of 650,000 new households formed during the previous four years.
All of this is good news for the housing market, which many economists feel is in recovery after six years of the worst housing recession since the Great Depression of the 1930s. And there is cautious optimism going forward.
HOUSE HUNTING TIP: The state of the housing market is not steady across the nation. For example, areas that have strong job growth like the Silicon Valley, San Francisco Bay Area, North Dakota, Texas and Denver are generating jobs, which create demand for housing. The economies in these areas are tied to oil production and technology.
Phoenix is the leader in terms of annual growth, up 20.4 percent in 2012 as of the end of the third quarter, according to David Blitzer, chairman of the Index Committee of the S&P Dow Jones Indices. This is one of the markets most heavily hit during the recession. On the other end of the spectrum, Blitz reported that the September housing data showed an annual decline in the growth rates in Chicago and New York City of 1.5 percent and 2.3 percent, respectively.
Ken Rosen, chairman for real estate and economics at the University of California, Berkeley’s Haas Business School, spoke at a recent symposium during which he said the housing market is in recovery in most parts of the country. However, some places, like Las Vegas, will never get back to their former growth rate.
He pointed out the importance of focusing on local areas. For instance, even though the San Francisco Bay Area housing market is moving ahead nicely, the West Bay (San Francisco south to Silicon Valley) is having a stronger recovery than the East Bay.
Rosen noted that the housing market is cyclical; that can’t be stopped. There will be booms and busts. He thinks now is a good time to buy. Interest rates are low and will increase as the economy improves.
THE CLOSING: Select where you buy carefully, expect volatility to continue, and don’t buy for the short term.