Trulia reports that cities with strong job growth are seeing correlative gains in house prices, which experts say suggest strengthening underlying fundamentals in those areas. San Francisco, San Jose and Phoenix have all reported better than average gains in both jobs and home prices, with all three posting year-on-year price percentage gains in the double digits. Meanwhile, in cities like Seattle and Sacramento rents are falling as more people act to take advantage of white-hot property markets. Experts expect improving jobs reports to further improve housing markets as more people move to improve their living situations. For more on this continue reading the following article from TheStreet.
Job growth, not just investor demand, is boosting home prices, according to Trulia’s Chief Economist Jed Kolko.
According to Trulia’s Price Monitor, asking home prices, a leading indicator of sales price, rose 8.3% year-over-year in April. The index adjusts for seasonality and for the mix of homes sold.
Prices were up 4.3% quarter-over-quarter and 1.3% month-over-month on a seasonally adjusted basis.
Excluding distressed sales, prices rose 9.3% year-over-year.
Earlier Tuesday, CoreLogic said its Home Price Index gained 10.5% in March and its Pending HPI projected 9.6% year-over-year gains in April.
The more striking data from Trulia’s report highlighted the impact of job growth on home prices. Asking prices leaped the most in cities where the jobs market is booming, suggesting underlying fundamentals behind the housing recovery are strengthening.
"Strong job growth and the housing recovery go hand-in-hand," the report said. "Nationally, job growth increased 1.5 percent Y-o-Y in March. In San Jose, Orange County, San Francisco, and Phoenix — where asking prices rose more than 18 percent Y-o-Y — job growth was well above the national average. In fact, only the Detroit suburb of Warren-Troy-Farmington Hills, MI was among the list of top 10 markets with the highest price gains without above average job growth."
Meanwhile rents rose 2.4% nationally, the pace of rent growth has slowed, which is good news for renters who are still unable to afford homes. In the cities of San Francisco, Las Vegas, Sacramento and Seattle, rents are declining even though home prices are increasing at a scorching pace.
The housing recovery is welcome news for sellers waiting on the sidelines and underwater homeowners waiting for a recovery. But it has its share of skeptics.
The most cited argument is that the housing recovery is being driven by investor demand, with most first-time home buyers still largely cut off from the market due to tight mortgage credit conditions.
Still, recent reports show that buyers are in fact, fueling the housing demand, not investors..
According to the Campbell/Inside Mortgage Finance Survey released last week, investors accounted for just 21.8% of home sales in March. Investors accounted for only 13% of sales of non-distressed properties, the largest segment of the market. Current homeowners had a 50% market share and first-time homebuyers a 37% share of the non-distressed housing market.
And while price appreciation has been the swiftest in cities that have been most affected by the bust, such as Phoenix, job growth and household formation is playing a role in the recovery as well.
"Investors don’t deserve all the thanks — or blame — for rising prices," Kolko said in a statement. "Households are doing their part, too, as the economy recovers and more people go back to work and get on more solid financial footing. Local markets with strong job growth will see home prices continue to recover even after investors decide to cash out their gains and exit the market."
The improving job market is also likely to encourage young adults with jobs to move out of their parents’ homes and form new households, which will then get them thinking about home ownership, he said, highlighting the classic virtuous cycle that plays out in a housing recovery.
This article was republished with permission from TheStreet.