With a 10.9% increase from March 2012 to this March, home prices continued their upward trajectory as measured by the S&P/Case-Shiller Home Price Index. The index has been rising for some time, but the pace of the increase is now the highest since the “bubble” days of April 2006.
Some of that is due to an investment push by financial firms, as we noted last month in an article on February’s 9.3% year-over-year gain. The spending certainly seems to be widespread, with a dozen U.S. cities registering double-digit year-over-year gains. Hot markets basically got hotter, as Detroit, formerly up 15.2%, jumped 18.5%; Atlanta, formerly up 16.5%, jumped 19.1%, and Las Vegas, formerly up 17.6%, soared 20.6%. The price increase laurel still goes to Phoenix, where prices, are up 22.5%.
That’s if you can find anything to buy. Inventory is tight all over the country, and real estate listing aggregator Zillow has noted that in February, the number of listings on the site was down 17% from the previous year. Last week, the site published a report arguing that that’s due to homeowners who are “underwater” (remember them?) owing more on their mortgages than they have in equity, and thus unwilling or unable to list their homes.
However, the good news is that the number of Americans in foreclosure or late on their mortgages continues to decrease. A report from LPS Applied Analytics notes that the number of distressed homeowners dropped to 4.7 million in April, which is the first time in five years that that figure has come down below 5 million.
If we think of distressed homeowners as a tide-water mark, the flood of foreclosure is clearly receding.
So the question on the table for this month is: When can those homeowners recover enough to list their homes, pushing up inventory, and providing some balance to prices? According to Zillow, it may be the first quarter of 2014, at which point the firm predicts that 1.4 million homeowners who currently have negative equity (another way of saying they are underwater) will be positive again.
If you’re looking to buy, though, the national statistics aren’t necessarily a good guide to your local market. If anything, certain areas are seeing inventory even more constrained at high price points (where presumably owners may have two incomes, and/or some non-real-estate resources) than at low ones. That’s certainly the case in New York, where new condo inventory fell 41.7% in the first quarter, compared to the year before, versus a decline in overall inventory of 34.4%, according to a report from appraiser Miller Samuel.
That’s also the case in red-hot Phoenix, as real estate broker Bob Hertzog noted in a blog post dissecting the Zillow report, stating that “the greatest annual decreases in inventory were among the most expensive homes with inventory declines of 20.5% year-over-year. By contrast, mid-tier homes saw 17.2% reduction in inventory levels, and bottom-tier homes fell 9.1%.”
But you needn’t care about mansions if you’re buying a mid-tier home, and vice-versa. So if you’re in the market, and the news of “double-digit price increases” is making you nervous, don’t forget to check how homes at your specific price point are doing, and seek local market insight on inventory in that segment might unclog.