For nine straight months, national home prices have been in the positive, and the gains are only getting larger. The latest reading for November shows a 7.4 percent jump from a year ago, according to CoreLogic. That includes sale prices of distressed properties, bank-owned homes and short sales. This is the largest year-over-year jump since 2006 when we were at the height of the housing boom.
“As we close out 2012 the pending index suggests prices will remain strong,” wrote Mark Fleming, chief economist for CoreLogic in a release. “Given that the recently released Qualified Mortgage rules issued by the Consumer Financial Protection Bureau are not expected to significantly restrict credit availability relative to today, the gains made in 2012 will likely be sustained into 2013.”
Some had predicted price gains of between three and five percent in 2013, but these numbers seem to indicate the market could outpace expectations.
While competition among investors for distressed properties drove home price gains in much of 2012, the non-distressed market appears to be catching up. Excluding distressed sales, home prices still saw a healthy 6.7 percent annual gain in November, and analysts at CoreLogic are predicting an even larger 8.4 percent jump in December.
“For the first time in almost six years, most U.S. markets experienced sustained increases in home prices in 2012,” said Anand Nallathambi, president and CEO of CoreLogic. “We still have a long way to go to return to 2005-2006 levels, but all signals currently point to a progressive stabilization of the housing market and the positive trend in home price appreciation to continue into 2013.”
Just six states, Delaware, Illinois, Connecticut, New Jersey, Rhode Island and Alabama saw annual price depreciation. New Jersey still has a huge backlog of distressed properties, as does Illinois. Arizona, Nevada and California are seeing big home price gains, as investors there continue to inhale properties to take advantage of the very lucrative rental market. Still, even excluding distressed sales, Nevada saw a 12 percent jump in home prices.
There are, however, still looming headwinds to home prices, as banks ramp up foreclosures especially in states that require these cases to go before a judge. That new inventory could slow price gains in those states. Inventory, or lack thereof, is the primary driver of much of these gains. There were just 2.03 million homes for sale in November, according to the National Association of Realtors, a 23 percent drop from November of 2011 and the lowest supply since September of 2005.
Some are concerned that low inventory and not increased demand is juicing prices faster than is healthy for the housing recovery. If prices start to outpace earnings and employment growth, and then more properties hit the market this Spring, these gains could take a U-turn.