The housing market saw prices improve for single family homes by 5.9%, the largest increase year-over-year since 2005. An inside view into the numbers will open a window into ramifications for the economy.
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The improvement could bolster consumer sentiment and begin to bring in buyers who have been waiting on the sidelines.
Housing is typically stronger during the summer selling season but the gains this summer blasts through the .4% gains of last year and the 2% gain in 2010.
Rising home prices could also influence the result of the upcoming election. The economy has been a forefront focus of Americans and an improving economy is already solidifying the current administration’s chances.
Higher prices for homes means that the glut of foreclosures is dwindling. Distressed properties usually sell at a significant discount so fewer of those home on the market clear the way for higher prices.
Rising demand on the low end of the market is pressuring prices upward as traditional buyers enter the market. Investors have driven the market
so far, snapping up foreclosed properties and turning them into rental properties.
Prices improved in 16 of the 20 areas surveyed by the Standard & Poor’s/Case-Shiller home price index. The comparisons were year-over-year for July. It’s becoming a seller’s market as supply shrinks and prices are pushed upward.
That could cause buyers to once again sideline themselves, at least until next Spring’s buying season. Everything depends on the supply-demand factor and many homeowners are still underwater on their home values and cannot sell.
This inhibits the upward move of buyers into more expensive properties. Current prices are 30% below the highs and have reverted to prices seen in 2003. Would-be buyers still have a lot of debt and credit conditions are still tight.
But housing is providing a very bright spot in an otherwise lackluster recovery. If it remains strong, it could broaden the recovery and strengthen momentum.