By Robert Freedman, Senior Editor, REALTOR® Magazine
From a price perspective, the latest news is good for the housing market. Home prices for the second quarter are up on a year-over-year basis in almost two-thirds of the big metro areas that the National Association of REALTORS® tracks, and in almost 10 percent of markets, the gains were in the double digits. The national median home price at the end of June was $176,900, about 1.5 percent higher than the same time last year.
Although the clear firming up of prices is positive, the question you’re no doubt asking is: What happens going forward? The second-quarter data reflects the impact of the home buyer tax credit. When it comes out, the third-quarter data won’t have the stimulus effect of that credit. So, what the numbers look like at the end of September will be illuminating.
Based on his most recent comments, NAR Chief Economist Lawrence Yun believes prices should hold steady, with no swings either up or down, for the near term even though the tax credit is gone and the economy isn’t being cooperative. The reason for the predicted stability is the way prices change over time. Price shifts tend to reflect longer-term trends, and the long-term trend for the past year or so has been stabilization.
As I interpret his point, there would have to be a significant shift in the economy for big changes to show up in broad home price trends. So, if the economy remains sluggish but doesn’t lurch downward, prices could remain relatively stable (with small up or down movement on a month-to-month basis) for the next several months. But if the economy remains sluggish until, say, the end of the year and beyond, then prices could be affected.
Of course, you have to approach national price data with a realistic eye. Last year, distressed sales comprised almost 40 percent of sales, compared to a little over 30 percent this year through the second quarter. That means some of the price improvement could be the result of the different mix of properties, not price appreciation.
The bottom line, though, is that prices so far are stable. That’s good for consumer confidence. When the stable prices are combined with historically low rates (about 4.9 percent on average right now for long-term, fixed-rate financing), you have good conditions for the market. For that reason, housing prospects are really hinging on jobs. Tepid job growth is the main impediment to rising consumer confidence.
Access NAR’s latest quarterly price data for yourself: Metro Area Median Prices.