Home Prices Rise, Putting Country in Buying Mood

Americans are in a buying mood, thanks largely to the housing recovery.

The latest sign emerged Tuesday as the Standard & Poor’s Case-Shiller home price index posted the biggest gains in seven years. Housing prices rose in every one of the 20 cities tracked, continuing a trend that began three months ago. Similar strength has appeared in new and existing home sales and in building permits, as rising home prices are encouraging construction firms to accelerate building and hiring.

The broad-based housing improvements appear to be buoying consumer confidence and spending, countering fears earlier this year that many consumers would pull back in response to government austerity measures.

In January, the two-year-old payroll tax holiday ended, stripping about $700 from the average household’s annual income, according to the nonpartisan Tax Policy Center. Federal government spending cuts that started in March are also serving as a drag on economic growth, economists say. And some recent data on other parts of the economy, like manufacturing and exports, have also disappointed.

Yet consumer confidence reached a five-year high in May, according to a Conference Board report also released on Tuesday, with big improvements in Americans’ views about both the current economy and future economic conditions. Consumer spending has also been strikingly resilient so far this year, given the tax hikes.

“Five years after the start of the financial crisis in earnest, and four years and a week’s time from the beginning of the economic recovery, we’re finally starting to get more of a pickup,” said John Ryding, chief economist at RDQ Economics. “It’s been a very drawn-out process, but you have to remember what we’ve been digging our way out of.”

The recent decline in gas prices is probably helping, as are increases in the stock market even though only about half of Americans own any equities. Perhaps most important, economists say, the growth in the value of the existing housing stock means that homeowners around the country are finally feeling richer, and that so-called wealth effect is probably making consumers loosen their purse strings a bit.

The positive impact of rising home values and the appreciating stock market is expected to offset at least a third of the fiscal tightening, according to Ian Shepherdson, chief economist at Pantheon Macroeconomic Advisors.

The Case-Shiller 20-city composite index rose 10.9 percent over the last year, the biggest increase since April 2006. Several cities — Charlotte, N.C.; Los Angeles; Portland, Ore.; Seattle; and Tampa, Fla. — had their largest month-over-month gains in more than seven years.

Stock markets rose on the news, with the S.& P. 500-stock index up 10.46, or 0.63 percent, at 1,660.06 and the Dow up 106.29, or 0.69 percent, at 15,409.39 at the close on Tuesday. The Nasdaq was up 29.74, or 0.86 percent, at 3,488.89. The 10-year Treasury yield surged to 2.17 percent, its highest level in over a year.

The double-digit housing price increase is being driven by a confluence of factors.

For one, employers have added jobs for 31 straight months, so families are willing to start buying again. At the same time, the inventory of homes available on the market remains unusually low, thanks to little new building in the last few years and the large number of homeowners who are still underwater on their mortgages, making them reluctant to sell at a cash loss.

Now there are signs that higher prices are beginning to encourage some would-be sellers to come off the sidelines and place their homes on the market. That could be healthy for the market, countering concerns that housing might become overvalued again.

“You’ve had this dynamic that has been favorable for price increases now, but it’s also favorable for supply to come back on market, so that will mean some moderation in the pace of price increases,” said Daniel Silver, an economist at JPMorgan Chase, who said that he expected home prices to continue growing but not necessarily at the double-digit rate seen in May.

Construction has been picking up, too, in response to the rise in home prices, but builders cannot bring homes to the market as quickly as buyers want them.

Empire State Home Sales, Prices Climb as Inventory Continues to fall

The New York State housing market continued to build on its early 2013 momentum with April gains in closed sales, median price and pending sales, according to the housing market report released today by the New York State Association of REALTORS. April 2013 closed sales for existing single-family homes, townhomes and condos were up 8.5 percent compared to April 2012, while the median price and pending sales rose 10 percent and 19 percent, respectively.  Year-to-date closed sales are 5.4 percent ahead of the first four months of 2012.

“The numbers support what New York’s REALTORS have been reporting with regard to strong buyer activity,” said Duncan R. MacKenzie, NYSAR CEO. “The gains may have been higher had inventory not been constrained. The number of homes for sale across the state is 17.7-percent below April 2012 level,” he noted.
“The fact that pending sales are at their highest level since April 2010 when the federal tax credit was in play certainly bodes well for our 2013 market going forward into our typically most active late-spring and summer period,” said MacKenzie. “We believe that as prices continue to increase, sellers, who have been waiting for the market to swing to their favor, will come off the sidelines to help meet buyer demand.”
The April market posted 7,121 closed sales, up 8.5 percent from the April 2012 total of 6,564. The year-to-date (Jan. 1 – April 30) sales total of 25,980 represents a 5.4-percent increase from the same period last year.
The statewide median sales price reached $218,875, an increase of 10 percent compared to the April 2012 median of $199,000, marking 11 straight months of rising or stable year-over-year median price comparisons. The year-to-date (Jan. 1 – April 30) median sales price of $217,000 represents a 5.9-percent increase from the same period last year.
Pending sales jumped 19.9 percent to 11,382 in April 2013 compared to 9,496 in April 2012.
The months supply of inventory dropped 25.4 percent in April to 9.7 months supply. It was at 13 months in April 2012. A 6 month to 6.5 month supply is considered to be a balanced market. Inventory stood at 84,104 units in April 2013, a decrease of 17.7 percent compared to April 2012.

Additional data is available at http://www.nysar.com/industry-resources/market-data

Editor’s Note: All data is compiled from multiple listing services in the state of New York and the data now include townhomes and condominiums in addition to existing single-family homes.
The New York State Association of REALTORS is a not-for-profit trade organization representing more than 47,000 of New York State’s real estate professionals. The term REALTOR is a registered trademark, which identifies real estate professionals who subscribe to a strict code of ethics as members of the National Association of REALTORS. These REALTORS are also members of the New York State Association of REALTORS as well as their local board or association of REALTORS.

April Home Sales Up 6 Percent in Albany Area

Closed sales of homes increased 6 percent in April in the Albany, NY region while sales contracts, a sign of future activity, rose 15 percent, according to preliminary figures released today.

The median sale price increased 4 percent, to $194,600, and the average price increased 5 percent, to $217,340 on homes sold through the Capital Region Multiple Listing Service.

Total inventory of homes for sale fell 14.1 percent.

The data, which was released by the Greater Capital Association of Realtors, is a sign that the residential sales market “has reached or is close to balance between buyers and sellers,” GCAR officials said.

Sellers are no longer at a negotiating disadvantage as they had been during the five-year long slump that was triggered by the recession, said Miguel Berger, GCAR president. Historically low mortgage interest rates are one of the reasons activity has picked up.

“Clearly buyers are returning to the market,” Berger said. “And as we see the market start to balance itself we can also report that housing prices are appreciating at a ‘normal’ rate. All in all the market appears to be healthy and we expect this to be a long term trend.”

The sales results for the four largest counties in the CRMLS were:

Albany County: closed sales down 11 percent; pending sales up 21 percent; median price up 4 percent, $198,000; average price up 4 percent, $225,585

Rensselaer County: closed sales up 4 percent; pending sales up 29 percent; median price down 8 percent, to $165,000; average price down 19 percent, $166,639

Saratoga County: closed sales up 24 percent; pending sales up 17 percent; median price up 7 percent, $260,000; average price up 8 percent, $282,026

Schenectady County: closed sales up 24 percent; pending sales up 11 percent; median price down 6 percent, $149,200; average price down 5 percent, $171,561

Renovated and ready: The Sagamore resort will be open year-round

BOLTON — The Sagamore Resort has opened for the season — and the next one and the one after that.

For the first time since the winter of 2008-09, the Lake George destination is returning to year-round operation, featuring floor-to-ceiling renovations of guest accommodations, the conference center, salon and spa.

The upgrades were unveiled Friday during a reception at the resort.

“We’re going to be open every weekend year-round, and we’ll expand operations if the business is there to do that,” said General Manager Tom Guay. “We feel there’s been an uptick in the economy, and our July and August have been gangbusters. We want that to carry over into the winter season.”

The 375-room resort was purchased by Ocean Properties Ltd. in 2008, and about 85 employees were quickly laid off as the new owners sought to make the resort profitable. It had been open year-round since the mid-1980s.

Guay said “aggressive renovations” were among the reasons the resort decided to close for the winter.

“We tried to open that first winter, but we were renovating the lobby, and people were coming up here from Manhattan and looking out at the lake, and there was this blue tarp in the way,” said Assistant General Manager Tyler Herrick.

Guay said laid-off employees may be asked to return to work, as year-round business dictates.

The conference center was last renovated in 1991, and while the bathrooms in the hotel rooms were renovated between 2002 and 2004, the kitchens in the suites were original, dating to 1985, Guay said.

He would not disclose how much was spent, but the work has not translated to more resort jobs.

“The projects we’ve done have enabled us to have efficiencies,” he said.

For instance, the spa and salon used to be in different wings of the hotel. Now, they are combined in one area.

The resort had about 350 staff as of Friday, with plans to bring on another 250 before the summer tourism season, Guay said. Those interested in applying for a position should visitthesagamore.com.

News of the year-round schedule follows an announcement this week Ocean Properties purchased Lake Placid Lodge in Lake Placid, making it the second hotel owned by Ocean Properties in New York.

“We’re excited because it’s now our sister property,” Guay said Friday. “There are absolutely going to be some property-to-property associations; I’ll have a role in both properties.”

Katrina Daugherty, owner of the Bolton Beans diner on Lake Shore Drive, was happy to hear about the resort’s year-round move Friday.

“When they were first bought out, it was a hard transition because the town was very used to them being here,” Daugherty said, taking a break from washing windows.

“But we’re resilient. We bounced back, and our winter business is just as good as when they closed. So, it’ll just be an added bonus, I feel. It will be like old times.”

Housing Market Accelerates

Home prices are rising at the fastest rate in seven years, with some communities seeing double-digit gains, as buyers are returning to a market where the number of properties for sale is in short supply.

 

Housing prices are up by double digits in Miami and several other markets over the past year. Here, a prospective sale in Miami earlier this year.

The U.S. housing recovery continues as home prices grew at their highest annual growth rate since 2006, according to the S&P/Case-Shiller survey. Nick Timiraos has details. Photo: AP.

5 Takeaways

From the outlook for price increases to performance during the seasonal slowdown, here arefive takeaways from the report.

Which Cities Did Best?

Even with the slower winter season, 11 cities posted monthly increases. On an adjusted basis, no city reported a monthly decline. This sortable table ranks the metro areas.

Homeownership Falls to 1995 Levels

Homeownership in the United States continued to tick downward, hitting its lowest rate in nearly 18 years, according to Census Bureau data released Tuesday. Here is an explanation.

Prices increased 9.3% in February from a year earlier while mortgage-interest rates hovered near record lows, according to the Standard & Poor’s/Case-Shiller index that tracks home prices in 20 major metropolitan areas. All 20 cities posted year-over-year gains for the second consecutive month, which hasn’t happened since 2005, before the crash.

In some of the hardest-hit markets, the gains have been particularly heady. Home prices rose 23% from one year ago in Phoenix and 18.9% in San Francisco. Nationally, the median home price in March stood at $184,300, well below the peak of $230,400 in 2006 but up from $154,600 in January 2012.

“Nobody that I’m aware of anticipated the kind of price growth that we’ve had,” said Budge Huskey, chief executive of Coldwell Banker Real Estate LLC. “It’s simple supply and demand.”

The Federal Reserve, whose policies have kept rates low, has a lot riding on the housing-market rebound. The encouraging data come as other aspects of the recovery disappoint: Hiring remains patchy and the unemployment rate, at 7.6% in March, is more than 2½ percentage points above where it was when the recession started in late 2007. Consumer-spending data this week, while solid, pointed to some second-half headwind.
The real-estate market’s brisk rebound also raises concerns among some observers that traditional buyers, facing still-stringent mortgage-lending standards, are being squeezed out because investors are able to make winning bids by offering to pay in cash. Others are concerned that the pace of recent price gains isn’t sustainable.

For now, recent data suggest home-price gains are likely to continue. Sales of previously owned homes rose by 10.3% from one year ago in March, even as supplies of homes for sale fell by 16.8%. The Wall Street Journal’s quarterly survey of market conditions in 28 metropolitan areas showed very low supplies of homes available in a rising number of markets, including a less-than-three-month supply in a dozen markets, including the two hottest—Phoenix and San Francisco.

Supplies have dwindled as banks have pushed fewer homes through foreclosure and because many homeowners are either unable or unwilling to sell due to a variety of factors related to the housing-crash hangover. Meanwhile, demand has picked up as the economy has added jobs, which has boosted household formation. Rising rents and falling mortgage rates have made ownership more attractive.

The housing rebound is also closely tied to the Fed’s campaign to lower interest rates, which has sped along the recovery in two key ways. First, by reducing yields on a range of assets, the Fed has made housing a more attractive investment. Investors of all sizes have been buying homes, often with cash, and converting them into rentals.

Indeed, prices are rising even as the homeownership rate fell during the first quarter to 65%, reaching its lowest level since 1995, according to a separate report Tuesday by the Census Bureau. The report showed that relative to 2004, there were 7.2 million more renters but just 400,000 new homeowners, according to Capital Economics.

Lower mortgage rates spurred by the Fed have also created urgency for traditional buyers, and they have made buyers who take out mortgages more immune to recent price increases. Even with the gains in home prices, housing is more affordable than at any time in the past 30 years because mortgage rates are so low.

At current mortgage rates near 3.5%, home values would need to rise by 32% nationally—and by as much as 48% in markets across the Midwest and north Florida—for affordability to return to its long-run average, according to an analysis by John Burns Real Estate Consulting in Irvine, Calif.

Still, the speed of recent price gains has raised concerns that prices could be going up too fast relative to incomes. “There is enough improvement in the underlying fundamentals to suggest that the housing recovery is well on its way. The only question that somebody could legitimately ask is, ‘Is the pace sustainable?’ ” Mr. Huskey said. “You cannot suggest that we could sustain double-digit gains year after year.”

Normally, he said, prices should rise by 3% to 4%, outpacing inflation modestly. No one should be “buying a home because they think the 23% increase in Phoenix is going to be repeated two or three years in a row,” Mr. Huskey said.

Economists say that, for now, home prices in most parts of the country remain in line or below their long-run relationship with incomes and rents. “In many instances, owning still beats renting,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank DBK.XE +6.11% . “I don’t think this is bubble-like at all.”

Also, many parts of the country that are seeing the strongest price increases witnessed some of the largest declines. In those markets, “there is room for prices to rise relative to incomes because they are at such a low base,” said Frank Nothaft, chief economist at Freddie MacFMCC -1.22% .

The concern is that home prices could more easily rise above their traditional relationship to incomes because lower mortgage rates will enable buyers to swallow price increases. “We are encouraging people to buy an asset that, when [mortgage] rates go back to 6% to 8%, will look a bit overpriced,” said Stan Humphries, chief economist at Zillow, the real-estate website.

For now, buyers are scrambling. Matthew Sinn and his wife decided to buy a home earlier this year in St. Petersburg, Fla., after talking to a friend who works in real estate.

The friend “said if you don’t get in now, things are going to skyrocket over the next year,” said Mr. Sinn, a 35-year-old television producer who paid $191,000 for a three-bedroom townhome. He said they were worried that “the homes you want—that you can afford—you might be priced out of buying a year from now.”

Mr. Sinn and his wife raised their initial offer by $6,000 in order to beat a competing bid from an investor paying cash.