Housing Markets & Economy Recover at Different Rates

August 08, 2012 / Russell Legato, Residential Property Analyst

Things look bright for the real estate industry because the decline in home values has stopped. There may be a few more twists and turns before full recovery exists in the Housing Market & Economy though. One analysis, Fiserv-Case Shiller’s home index reading announces that prices for millions of properties owned by American homeowners now gain in value.

Housing Markets & Economy Recover at Different Rates

In a whopping 40 percent of the 384 metropolitan areas that were assessed, the price of houses is predicted to go up by 5 percent. There is, however, one caveat. Prior to the 5 percent increase, there might be a 1 percent decrease sometime in the next year.

The impending news of home values going up may result in a surge. That is because more buyers will make an offer to purchase before the prices rise. Another factor compelling people to buy is the fact that rents on homes and apartments is increasing. It has become cheaper to buy than rent.

A short time ago, people were finding it cheaper to rent than live in a home they owned. Due to circumstances beyond their control, some offered their single-family home for rent and moved into a cheaper to maintain apartment. No one else could afford to buy their home, yet they could no longer afford the expense of living in it. It seemed there was no other solution for them at the time.

Now that is changing. With the inventory of homes for sale decreasing, that lower volume available increases home prices because the demand is greater for the remaining properties. There are now fewer than 2.5 million single family homes for sale. But, there are still factors to be resolved for those who already own homes. Negative equity is one.

The term negative equity refers to a homeowner who is underwater. He or she owes more money on the mortgage than they could get by selling the house on the market today. Homeowners who are fortunate enough to have positive equity are now holding off on selling their homes. They feel if they can wait it out a bit longer, they will receive a higher profit when they sell.

Real estate is only one segment of the economy and although its recovery is welcome, next the job market must recover. Then we can all breathe easier knowing that Housing Markets & Economy are recovering at an even pace. It has been a long awaited event.

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