According to a study conducted by S&P/Case-Schiller, housing prices increased in 19 out of 20 major U.S. cities. This April’s rise in housing prices represents the first increase in seven months. Still, housing prices remain close to the record lows they reached after the 2008 housing market collapse.
This means the housing market has yet to show signs of rebounding. Despite this, the market still reacted favorably to the release of the study. Home builders, Toll Brothers and PulteGroup, Inc., saw stocks shoot up by over 5 percent, with D.R. Horton seeing an increase of over 3 percent.
All told, housing prices increased by an average of 1.3 percent for April. This increase was preceded by new lows in March. Still, the national average for housing prices remains near 2003 levels and is still over a third below what the average housing price was in 2006, when housing prices peaked. The biggest increases were in Phoenix, Washington and San Francisco. Housing prices in Detroit, the only city to see a decrease, dropped by 3.6 percent.
Signs of a housing market recovery?
Thus, it’s hard to draw much in the way of conclusions about the housing market just yet. The increase is slight and still leaves housing prices decidedly in the gutter. It’s far too early to talk about a housing market recovery. This is especially true because a housing market recovery will almost certainly be reliant upon a jobs recovery.
The most recent figures on jobs and manufacturing are not promising: June saw the slowest growth rates for manufacturing in 11 months and April had the lowest job openings in five months, with only one job for every three Americans looking for work.
Another problem with the report: It’s not adjusted for seasonal patterns. May and June are traditionally the strongest months for new home sales and the April uptick might have more to do with seasonal patterns, than any substantive changes in the economy. Still, March saw a 2.6 percent drop in the average price of a new home, making the news of April a welcome improvement by any measure.
How long will it last?
The newly released figures might cause people who have been waiting to start buying, however. Home buyers are often reticent to purchase a home if they are concerned that the price will drop after purchase. With the housing market posting gains, however modest, those who have been sitting on the fence for months might have just the news they need to start getting serious about buying a new home.
Further, the increased interest in new home purchasing has provided builders with increased confidence. More permits were applied for new residential buildings in May, than in the last three and a half years.
The chicken and the egg (housing and jobs).
While jobs and manufacturing prospects remained on the grim side, there were other positive signs for the housing market. RealtyTrac reported that housing sales on foreclosed properties increased for the first quarter of 2012.
This is significant because empty foreclosed properties put downward pressure on the overall value of a neighborhood. With foreclosed properties being filled with new owners, there’s some indication that the housing market could be seeing a bit of a turnaround on the backs of foreclosed property sales.
Further, the overall supply of new homes for sale is limited. This helps to stabilize prices by keeping supply and demand somewhat in sync with one another. But it’s worth noting that the housing market and jobs market have a bit of chicken-and-egg quality about them; The housing market largely drove the jobs market for over a decade, with construction as the conveyor belt of the American consumer economy. It’s difficult at this time to say if one can recover without the other and where the recovery has to begin for either to truly go back to their levels before the economic decline.
“Housing Prices on the Rise” was written by Nicholas Pell, a freelance writer based out of Los Angeles, CA.