The April 2012 numbers tell the story. Sales of existing homes rose by 3.4%, to an annual rate of 4.62 million, according to the National Association of Realtors. The median price of an existing home, at $177,400, was 10% above last year’s level.
Purchases of new homes in April rose by 3.3%, to an annual rate of 343,000 — up 9.9% from a year ago. The median sale price of a new home increased by 4.9% from a year ago, to $235,700. Housing starts improved by 2.6%, to an annual rate of 717,000—up by 50% from their April 2009 low. And in the first quarter of 2012, home prices were up by 0.5% over the same period last year, according to the Federal Housing Finance Agency’s purchase-only house price index.
Of course, any expression of economic optimism has to be tempered these days.
Company managements, policymakers and investors fear that the worsening European economies have put us on the verge of another global catastrophe.
The Organisation for Economic Co-operation and Development (OECD)—the Paris-based think tank for developed nations—recently projected that the euro zone will contract by 0.1% in 2012. China’s economy appears to be losing momentum. Washington remains paralyzed as high-stakes elections loom. And foreclosures, short sales and a large “shadow inventory” of homes—ones held off the market but waiting to be sold—weigh on the housing recovery.
Still, the combination of a slowly improving labor market, moderate economic growth and record-low mortgage rates is finally shoring up the housing market.
Other factors are behind a renewed appreciation of owning. For instance, the monthly cost of owning is less than renting in a majority of cities. In fact, at current mortgage rates, home prices would have to rise by 35% to get back to their average historic relationship to rents, according to calculations by Segal Rogerscasey, a global investment advisory firm headquartered in New York City.
Demographics enter into the equation as well. Household formation is expected to increase from the low level of approximately 600,000 in 2011 to one million households a year — a number more consistent with the historical average.
Shelley Bryant, Broker/Owner of Villa Realty, 303-521-7085
Serving Lone Tree, Highlands Ranch, and surrounding areas