Rising Home Prices Explained

Analytics firm Data Quick reports that home prices are improving all across the country, including some places that have suffered some of the worst fallout. Data indicate that …

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Analytics firm Data Quick reports that home prices are improving all across the country, including some places that have suffered some of the worst fallout. Data indicate that 13 of the most troubled real estate markets have already seen significant growth in 2013 and experts say there are telltale signs that explain the gains. The first is that employment is up in many of these areas, which is giving more people a chance to get into the market. Another is that home improvement revenue is up as measured by gains at stores like Home Depot and Lowe’s. Finally, some feel it’s simply because the bottom was reached in these markets as they were elsewhere in the country. For more on this continue reading the following article from TheStreet.

The housing market is growing so robust that even "hard-hit" regions are getting up off the mat and back in the fight.

In California, pending home sales are at a four-year high, according to the California Association of Realtors. That’s increasing homebuyer competition and leading to multiple offers on many homes, the group says.

"The strong increase in January’s pending home sales is an encouraging indication that we’ll kick off the spring homebuying season on a solid start," says Don Faught, president of the association. "However, a low supply of available homes for sale will affect buyers, especially first-time buyers looking for more affordable, lower-priced homes, since they are having to compete with investors and all-cash buyers."

According to San Diego-based Data Quick, a real estate technology analytics firm, 13 of the most troubled U.S. housing markets also saw "significant" growth rates in the first 30 days of 2013.

Phoenix, Ariz., leads the way with a 24% increase on a year-to-year basis (from January 2012 through January 2013). Sacramento, Calif., clocks in second, at 15%, and Detroit hits third place at 14%.

Other "troubled’ metro areas experiencing housing price gains include Las Vegas; Richmond, Va.; San Jose; Fort Myers, Fla.; San Diego; and Orlando, Fla.

Data Quick is, well, quick to point out that there is no way of knowing whether those price gains are for the long haul. "The January PIR reviews whether or not there is justification for these elevated growth rates, or if these growth rates are evidence of a new bubble forming in these areas," says Gordon Crawford, vice president of analytics at the company. "Although these markets are rebounding, there is uncertainty as to whether or not they will sustain consistent growth."

For now, though, growth it is, and at a steady, upward rate. Why the ramp-up in home values? Experts cite three reasons:

Employment is up. Data Quick says the U.S. jobs market is "steadily improving," and that has fueled home price gains in those hard-hit markets and other metro areas, as well.

The "bottom" has been reached. For years, economists, real estate agents and even homebuyers and homeowners yearned for a real estate market bottom, signaling that the worst is behind us and prices could once again move upward. Apparently, that benchmark has been reached. "During the housing crisis, many were uncertain as to where the bottom in home prices had been reached, causing many owners and investors to patiently wait on the sideline," Crawford says. "Once interested parties saw a market trough, they eagerly returned to the market."

Home improvement stocks are up. Revenues at home improvement retailers such as Home Depot (HD) and Lowes (LOW) are up, and that means consumers are once again putting money into improving their most valuable asset — their homes. Fitch Ratings says that store sales figures were up 4.2% at Home Depot in 2012, while Lowes showed gains of 1.4% over the same period. Those growth rates should continue in 2013, Fitch says. "We project Home Depot and Lowe’s will generate same-store sales growth of approximately 2% to 4%, which is slightly below our forecast for 4% growth in total home improvement spending this year," Fitch states.

All in all, those trends paint a pretty picture of the U.S. housing market for the rest of 2013.

With any amount of luck, there’ll be enough paint left over for 2014.

This article was republished with permission from TheStreet.

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