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Home Values Climb for the First Time in 3 Years
It looks like the Marin real estate market is not the only market beginning to see home prices on the rise. Throughout the United States, home values went higher in May for the first time in three years, according to a report released Tuesday. The report comes from Standard & Poor's and Case-Shiller and includes data from the largest 20 cities in the country. The gain in home values of about half a percent is the first in the monthly index since July 2006.
Prices are still about 17% lower than a year ago, but May was the second in a row in which the year over year values declined less. Economists say that this could be a sign that the declining home values are stabilizing. The rising values are in part due to the recent drop in foreclosure listings and should continue in the next few months.
Analysts caution that if foreclosures pick up again, then prices will likely once again fall. Another factor is the Administration's efforts to boost confidence in the housing market. The stock market is improving and people are believing that an end to the recession is coming.
The 20 cities in the index showed varied results, as 13 showed gains, 5 reported losses, and 2 showed no change. The largest gain was reported in Cleveland, Ohio, where values rose by just over 4%. The city with the largest drop in prices was Las Vegas, Nevada, where prices fell just over 2.5%.
The report is yet another good sign for the housing markets. Other good signs include the rise in sales for new homes, an increase in home construction, and more sales pending. Nonetheless, economists warn that It's not yet time to celebrate based on one positive month. Unemployment is still high, and could continue to rise even after the recession ends. Until consumers gain a sustained confidence in the economy, many will still be reluctant to start buying again.
Stabilizing the housing market has been a primary goal of the government. The administration, in an attempt to encourage housing purchases, instituted an $8,000 tax credit for first time buyers who buy before November 30. They've also addressed the foreclosure problem with a program designed to help troubled homeowners avoid losing their homes by offering incentives to lenders to restructure loans. Mortgage companies are still learning how to utilize the plan, and have delayed the foreclosure process in many cases. This has led to fewer distressed properties which typically cause prices to fall.
The government also took control of mortgage giants Fannie Mae and Freddie Mac. The companies provide a constant flow of cash for the entire mortgage industry and were both in danger of going under before the government stepped in. If they had been allowed to collapse, mortgage lending could have dried up and the housing market devastated.
Another major cause for increased sales is the rock bottom prices in many areas. In Las Vegas, prices are more than 2% lower than their historical high from August, 2006. Phoenix prices are down 53%. Across the 20 cities in the index, prices are down an average of more than 31%.
Also, interest rates are quite low. This has boosted sales as well. The average rate for a 30 year mortgage stayed well below the 5 percent mark through May, encouraging buyers and raising demand.
Marin Real Estate Blog
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