For the first time since 2007, housing prices are on the rise on a year-over-year basis. Prices are expected to have risen 2% from the second quarter last year in a Zillow Inc. report issued Tuesday, July 24. The Zillow report is reflective because it measures prices within a specific community rather than reporting median sales gains.
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Cities with a positive demand-supply ratio saw prices rise the fastest. Prices in Phoenix were up 12% and Miami saw price increases of 6%. With many other economic indicators still showing weakness, the improvement in housing prices shows that the recovery in housing may be for real.
Demand is picking up and inventories are going down. As banks have restructured or modified distressed loans, there have been fewer foreclosed properties on the market. Foreclosures are down 23% and are at the lowest level since October of 2009.
Investors have been purchasing foreclosed properties and renting them. This also keeps these houses off the market. More people who own houses they wish to sell are being patient in hopes that prices will rise in a few years and they will be able to recover their original investment or even make a small profit.
Still, economists feel that the private sector continues to have too much debt to qualify for mortgages. This may cause housing to recover more slowly than hoped. There are also about three million distressed mortgage situations that have yet to be repossessed by lenders. This creates a sort of shadow supply that may also slow down the housing price recovery.
All in all, it seems that the economy has positive underpinnings. So the need to step back and view the economic picture from a larger perspective may give you and your clients a better sense of how and where to invest.