Now that home prices have bottomed out, they have finally started rising, much to the relief of current home sellers. Across the nation, home value averages increased 0.2 percent from last year to a median price just under $150,000. The increase marks the first annual rise since 2007 when the housing market tanked, reported real estate listing site Zillow. (Zillow’s Home Value Index enables potential or current homeowners to look up the median home price for a home in their neighborhood or city.)
Even in the short term, market watchers have noted an increase in home values. Since the first quarter, home prices have risen 2.1 percent on average. June’s numbers showed four consecutive months of rising home values. Despite the increase, home values remain well below their estimated values in the early 2000s, which is good news for home buyers and property investors looking for a bargain.
Signs of Recovery Building Steam
The once tenuous housing recovery seems to be building steam even amid poor job reports and an unemployment rate of around 8.2 percent. Zillow’s chief economist Stan Humphries believes there is light at the end of the tunnel. “The housing recovery is holding together despite lower-than-expected job growth, indicating that it has some organic strength of its own,” Humphries said.
Moreover, home price indexes from the Case-Shiller organization and the Federal Housing Finance Agency recorded gains in the first quarter of the year. Although these indexes use a different set of data from the Zillow index, they reported a similar level of increase. In April, home prices rose 1.3 percent across 20 major markets. The largest market gains were in Phoenix, one of the hardest hit cities in the housing crash. Leading the nation, home values in Phoenix jumped up 12 percent from last year’s home price index to a new median price of $136,200.
Time to Go Shopping for a New Home
While the housing recovery may have gotten off to a sluggish start, now is the time for potential home buyers to start shopping. For the past two years, the housing market would sputter along, gaining value in one quarter, only to slip in the next quarter. However this year, a markedly different pattern is emerging with consecutive gains in both home values and home sales. As price indices record further growth, any lingering doubt that the housing market hadn’t bottomed out will diminish, Humphries said.
Foreclosures Present Greatest Threat to Housing Recovery
Perhaps the biggest risk to the budding recovery is foreclosures. The pace of foreclosures will presumably speed up as the federal mortgage settlement agreement starts to take effect. Under the new agreement, banks are incentivized to expedite the foreclosure process, which translates into more homes on the market at lower than average values, Humphries said. The good news is that demand is expected to rise as foreclosed properties enter the market in greater numbers.
Beyond rising home values, other signs contribute to an overall positive outlook on the housing market. The homebuilding industry is becoming more attractive to investors as demand for homes from first-time buyers and property developers couples with a shortage of new housing. Also, supportive government initiatives like the new Consumer Financial Protection Bureau are helping overhaul the mortgage market that was partly responsible for the crash in 2008.