On a Roll: Home Prices Up for Sixth Straight Month
The Case-Shiller numbers rolled in on Tuesday and brought yet another good report: U.S. home prices continued to rise throughout the third quarter of 2012. The third quarter contains some of the warmest months of the year – July, August, September – and that’s reflected in increased buyer demand. More people are out looking at homes when the sun is out, and a lot of people have more flexibility to move during the summer months, so it should be no surprise the third quarter is usually pretty strong.
Home prices continue to rise
Compared to the third quarter of 2011, the national composite was up 3.6 percent. The real estate market is still climbing out of a pit, but it’s making more progress, quarter over quarter and year over year. September’s price gains – albeit a modest gain of 0.3 percent – represents the sixth straight month of home values increasing. The market is on a roll… for now.
Nick Timiraos, of Developments, puts it this way: “Some of the gains in home prices are seasonal, of course. Prices typically soften in the last quarter of the year, as there’s less sales activity during the colder months of the year. But those declines probably won’t be large enough to wipe out the gains from the first three quarters of the year.”
Cities leading the charge and bringing up the rear
Phoenix, AZ leads the pack with a remarkable 20.4 percent annual growth rate in its home prices. Minneapolis, San Francisco, and Miami follow behind with 8.8, 7.5, 7.4 percent growth, repesctively.
Also of note, Atlanta, which has been a straggler in terms of recovery posted a tiny, but significant increase both year over year (0.1 percent) as well as month over month (0.3 percent).
And bringing up the rear with annual price declines are New York, which saw a drop of 2.3 percent, and Chicago, which decreased by 1.5 percent from 2011 to 2012.
The foreclosure factor
Throughout the housing collapse and slow recovery, we’ve often looked to the foreclosure figures to give us an idea of how quickly the market would bounce back (answer: not quickly at all), whether a shadow inventory of distressed listings flooding the market would kill the recovery (answer: you never know, but there doesn’t seem to be more than a trickle in sight), and how much foreclosures were affecting home values across the country (answer: less and less as time goes on).
According to the latest data from Realty Trac, the number of new foreclosures was up in October compared to September by 3.34 percent. That’s not a huge jump, but that’s not good, right?
Well, it doesn’t seem to be terrible as the average sales price of distressed listings is also going up, and by a lot more, too. Foreclosures are now selling at an average of $184,894 compared to $171,900 in September. Plus, more are selling! 13.49 percent more foreclosures sold in September as compared to August.
How do we explain this mixed news? For that, we look to the foreclosure discount.
If you’re a buyer looking at distressed listings, you’re hoping to get a good deal, of course. Three years ago, you could get about 24 percent off compared to a traditional home resale. A year ago, that number stood at just under 10 percent. It’s now dropped to 7.7 percent, according to Developments.
So even though that might not be as great for buyers looking for a steep discount, the fact that foreclosures are less “on sale” than they used to be is good for the market overall, because they can help buoy home prices upwards rather than dragging them down.
If you’re looking for a good deal, you may have more luck with holiday shopping promotions than in the foreclosure arena. But as we approach the end of the year, we’re happy to see that the market continues to recover!