Home Prices on the Rise

It looks as if 2013 will be a good year for the real estate market as housing prices continue to rise.

Recent reports from CoreLogic show nationwide housing prices increased by 6.3 percent from October 2011 to October 2012, the largest year-over-year increase since June 2006. This data includes the prices of distressed homes, which makes it even more impressive as these homes are usually sold below market value.

In a recent report from Barclays Capital, housing prices are predicted to return to peak levels as early as 2015 after falling more than a third in what Stephen Kim, an analyst with Barclays, referred to as “… a dramatic over-correction during the prior five years …”

According to The Wall Street Journal, J.P. Morgan Chase & Co. expects U.S. home prices to rise 3.4% in its base-case estimate and up to 9.7% in its most bullish scenario of economic growth. Standard & Poor’s, which rates private-issue mortgage bonds, expects a 5% rise in 2013.

CNN Money reports that real estate research firm Fiserv’s chief economist David Stiff predicts that prices should increase 3.4% from the second quarter of 2013 to the second quarter of 2014.

Other factors that may be contributing to the rise in housing prices are inventory of houses for sale are at their lowest level in over 10 years and mortgage interest rates are at an all-time low. According to Calculated Risk, HousingTracker reported that the early December listings, for the 54 metro areas, declined 21.7% from the same period last year. Investors.com reports the average rate of a 30-year loan is under 3.3% and the average rate of a 15-year fixed mortgage is now under 2.7%. These rates are at, or below, the lowest rates on record.

The combination of factors which include housing prices rising, low inventory, and record low interest rates have fueled an increase in buyers looking to take advantage of current conditions. Many investors and home buyers believe that now is the best time to buy a new home. The Mortgage Bankers Association forecasts that home sales will increase and expect new-home loans for purchases to jump 55%, based in dollars, in 2013.

With the rise of housing prices in most of the country and the continued improvement in the real estate market, the overall economy should become stronger and continue to rebound in the coming years.

New Home Starts and Prices Going Up

With housing starts the highest they have been in four years, home prices on the rise, and foreclosures at a five-year low, it looks like the housing market is making a sustained recovery, and some are predicting another housing boom within the next few years.

According to CNNMoney, A New Housing Boom (Oct. 12, 2012), many economists believe the housing recovery will produce only slow and modest improvement in home prices, new construction and jobs, however Barclays Capital put out a report recently forecasting that home prices, which fell by more than a third after the housing bubble burst in 2007,  are expected to rise by 5% to 7.5% a year and could be back to peak levels as soon as 2015.

“In our view, the housing market had undergone a dramatic over-correction during the prior five years, resulting in pent-up demand for housing purchases that would spark a rapid rise in housing starts,” said Stephen Kim, an analyst with Barclays, in a note to clients.

Numerous experts are forecasting home construction to grow by at least 20% a year for each of the next two years. Some believe building could be back near the pre-bubble average of approximately 1.5 million new homes a year by 2016, about double the 750,000 homes expected this year.

“We think the recovery is for real this time around,” said Rick Palacios, senior analyst with John Burns Real Estate Consulting. “If you look across the U.S. economy right now, there are only a handful of industries looking at 20-30% growth over the next 4-5 years, and housing is one of those.”


Whether the housing market makes a slow steady recovery or ramps up to another housing boom within a few years, it certainly appears that home prices are on the rise. With mortgage rates at a record low, and home prices likely to rise in the near future, this is an ideal time for anyone thinking of buying a new home to make that purchase and lock-in a low interest rate while getting the best price on a new home.

Now Is the Time to Buy a New Home

If you’ve been waiting to buy a new home thinking that the interest rates and new home prices will continue to stay as low as they are, or go even lower, you may miss out on the opportunity to get the best deal before they start going back up.

According to Bloomberg, House prices, after falling for more than five years, are rising again. All the major sales-price indexes show that there have been modest national increases in recent months, even after adjusting for seasonal patterns.

The San Francisco Business Times reports that Luxury home values in the Bay Area and other key California cities are chalking up their biggest gains since the housing boom went bust in the last decade. Bay Area luxury home values soared 6.6 percent in the second quarter, the biggest year-over-year gain since the first quarter of 2006.

Other major cities are seeing similar trends, and Forbes reports that according to CoreLogic’s August MarketPulse Report which provides insight into the current and future health of the U.S. economy with emphasis on housing and mortgage metrics, “While the general U.S. economy continues to struggle to make gains, for the first time since the end of the recession, housing may actually make a significant contribution to economic growth in 2012, a welcome change to affairs for an otherwise struggling economy.”

The cost of buying a new home is not completely dependent on the cost of the home itself but is also determined by the amount and interest rate of the home mortgage. Every percentage point the interest rate goes up could cost a home buyer hundreds of dollars more each month on their mortgage payment, or lower the amount that they can afford to borrow to keep their monthly payment where it needs to be.

For example, say you need to keep your monthly house payment at $1,000 or less. With the interest rate at 3.5%, if you can borrow approximately $220,000, a one percentage point rise to 4.5%, would only allow you to borrow around $177,000 to keep your monthly payment at $1,000/mo. If the interest rate goes up to 5.5%, you would only be able to borrow approximately $159,000. These figures are only approximate, and the amount of a home mortgage will be determined by additional factors such as credit rating, but even a one percentage point rise in the interest rate makes a large difference in the amount of money you can borrow for a set monthly payment.

If you are in the market for a new home in the Fayetteville NC area, please visit the McKee Homes website to view our Fayetteville new homes as well as our Fort Bragg new homes. McKee Homes offers such a great value for your money, you may find that you can buy a brand new home for the same amount or less than a pre-owned home. McKee Homes also works with a dedicated SunTrust Mortgage team to get you the lowest interest rate new home financing available with no-money-down options for VA and USDA loans.

Monthly Payment

Max Loan at 3.5%

Max Loan at 4.5%

Max Loan at 5.5%

















The data shown in this table is only approximate and is based on 30 yr loan with good credit rating.

Energy Efficient New Homes

In March of 2012, the North Carolina Sustainable Energy Association announced that the 2012 North Carolina building codes should reduce energy consumption in new homes by at least 15 percent from homes built in previous years. Improvements in insulation levels and window performance, as well as building envelope air leakage reduction should result in a substantial step forward in saving energy and reducing monthly electric and gas bills for home owners.

In previous years The U.S. Department of Energy determined that a typical resale home scores 130 on the HERS Index, while a standard new home is awarded a rating of 100  (based on the 2006 International Energy Conservation Code), making a new home 30% more energy efficient than a resale home. When you add to that the 15% reduction in energy consumption with the new 2012 building codes, new homes built after March 2012 should deliver a significant reduction in monthly heating and cooling bills for home owners.

The HERS Index (Home Energy Rating System) is the industry standard by which a home’s energy efficiency is measured and the nationally recognized system for inspecting and calculating a home’s energy performance.

Most people understand the importance of having a well insulated home when it comes to energy efficiency; however the energy performance ratings of windows, doors, and skylights are also very important as is sealing a home against air leakage.

  • Insulation:Proper insulation offers one of the biggest energy saving benefits. Proper insulation also provides added comfort and noise reduction, thus improving the overall livability of your home.
  • Windows, Doors, and Skylights:Windows, doors, and skylights can gain and lose heat in several ways:
    1. Direct conduction through the glass or glazing, frame, and/or door. Low-E windows, doors, and skylights can protect your home from unwanted UV rays which can fade your carpets, and damage your furniture. They also help control radiant heat (infrared light) as it enters and leaves a room which keeps your house warmer in the winter and cooler in the summer.
    2. Radiation of heat into a house (typically from the sun), and out of a house from room-temperature objects, such as people, furniture, and interior walls.
    3. Air leakage through and around windows, doors, and skylights. The energy performance ratings of windows, doors, and skylights tell you their potential for gaining and losing heat, as well as transmitting sunlight into your home.
  • Air Sealing: Energy efficiency and comfort is compromised when air enters a house uncontrollably through cracks and openings – this is called infiltration. Infiltration reduces energy efficiency, and can cause problems with moisture, mold, and dust. Air sealing or properly sealing cracks and openings in your home can significantly reduce heating and cooling costs, improve building durability, and create a healthier indoor environment. Air sealing also reduces the likeliness of certain insects from entering your home.

If you’re considering buying a home in the Ft. Bragg/Fayetteville area of North Carolina, remember to consider more than just the price of the home, but also the cost of monthly heating and cooling bills. An energy efficient new home from McKee Homes can save you money every month and command a higher resale price while improving the quality of life enjoyed by you and your family.

By John Rives