According to the S&P/Case-Shiller Home Price Indices, home prices have risen 8.1% for a 20-city composite in the 12 months ending in January 2013. This is the highest year-over-year increase since the summer of 2006, which was the peak of the housing bubble. After more than two years of declines we are now seeing home prices across the United States returning to their late 2003 levels.
The housing market still has some ground to gain, but we should soon see a return to a normalized housing market with fewer people owing more on their mortgages than their homes are worth. This trend will allow home owners to refinance their homes at a lower interest rate giving them more money to spend on other goods and services, which in turn will help the economy recover even faster.
An overall decline in unemployment, near record-low mortgage rates, and a drop in available foreclosures, is helping the housing market recovery as home buyers are hoping to take advantage of the ideal market conditions to buy a home. This in turn is fueling a further decrease in unemployment as builders rush to hire construction workers to meet the renewed demand for new homes.
It’s uncertain how long the interest rates will remain at their present levels, but they will eventually start going up. This coupled with an increase in home prices, and a limited number of available foreclosures, means that home buyers will be pressed to make a purchase sooner rather than later. With the continuing improvements in the housing market, we may not see a better time to buy a new home again for a long time.
By John Rives