Home Prices Rise On Favorable Supply-Demand Factors And Lowest Interest Rates In 60 Years

Wednesday, August 08, 2012 07:06
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Home Prices Rise On Favorable Supply-Demand Factors And Lowest Interest Rates In 60 Years

Tags: economic indicators | economy | investment strategies

Prices for homes are increasing and supply of new homes is dwindling. Prices increased by their largest margins in seven years as a result of low inventories and high demand for deep-discounted foreclosures. The price increase from the first quarter to the second was the largest since 2005.

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Prices were said to have increased 6% from the first quarter; Fannie Mae uses a different calculation and said that prices increased 4.8% in the second quarter from the first.
 
Rising prices boosted profits at Freddie Mac to the best levels since the government took over the agency. Supply in homes is much tighter than it was one year ago. And with mortgage rates so low—the lowest they have been in 60 years—demand is growing.
 
New construction has struggled as competition from foreclosures has increased. But many traditional homeowners have not wanted to sell at a loss so they are holding on in hopes of higher prices down the road.
 
The Federal Reserve said the jump in mortgage applications is the highest it has been in three years. Investors who have been snapping up foreclosed properties in bundles are giving other buyers the confidence they need to add new life to the housing market.
 
Yet there are still 3 million homes that have not been taken back by lenders. These are all currently either in the foreclosure process or are seriously delinquent. The biggest concern is lack of job growth. People need income to pay mortgages and if jobs are not available, that income could be difficult to generate.

 

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