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.

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