Money Talks, So Should You

Why home values are rising, even in 'hard-hit' areas

The trends paint a pretty picture of the U.S. housing market for the rest of 2013.

Brian O'Connell
by Brian O'Connell, MainStreet contributor

NEW YORK (MainStreet) — The housing market is growing so robust that even “hard-hit” regions are getting up off the mat and back in the fight.

In California, pending home sales are at a four-year high, according to the California Association of Realtors. That’s increasing homebuyer competition and leading to multiple offers on many homes, the group says.

READ: Your home will never make you rich, and that's OK

“The strong increase in January’s pending home sales is an encouraging indication that we’ll kick off the spring homebuying season on a solid start,” says Don Faught, president of the association. “However, a low supply of available homes for sale will affect buyers, especially first-time buyers looking for more affordable, lower-priced homes, since they are having to compete with investors and all-cash buyers.”

According to San Diego-based Data Quick, a real estate technology analytics firm, 13 of the most troubled U.S. housing markets also saw “significant” growth rates in the first 30 days of 2013.

Phoenix, Ariz., leads the way with a 24 percent increase on a year-to-year basis (from January 2012 through January 2013). Sacramento, Calif., clocks in second, at 15%, and Detroit hits third place at 14%.

Other “troubled’ metro areas experiencing housing price gains include Las Vegas; Richmond, Va.; San Jose; Fort Myers, Fla.; San Diego; and Orlando, Fla.

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Data Quick is, well, quick to point out that there is no way of knowing whether those price gains are for the long haul. “The January PIR reviews whether or not there is justification for these elevated growth rates, or if these growth rates are evidence of a new bubble forming in these areas,” says Gordon Crawford, vice president of analytics at the company. “Although these markets are rebounding, there is uncertainty as to whether or not they will sustain consistent growth.”

For now, though, growth it is, and at a steady, upward rate. Why the ramp-up in home values? Experts cite three reasons:

Employment is up. Data Quick says the U.S. jobs market is “steadily improving,” and that has fueled home price gains in those hard-hit markets and other metro areas, as well.

The “bottom” has been reached. For years, economists, real estate agents and even homebuyers and homeowners yearned for a real estate market bottom, signaling that the worst is behind us and prices could once again move upward. Apparently, that benchmark has been reached. “During the housing crisis, many were uncertain as to where the bottom in home prices had been reached, causing many owners and investors to patiently wait on the sideline,” Crawford says. “Once interested parties saw a market trough, they eagerly returned to the market.”

READ: More sellers are getting their homes' asking price

Home improvement stocks are up. Revenues at home improvement retailers such as Home Depot and Lowes are up, and that means consumers are once again putting money into improving their most valuable asset — their homes. Fitch Ratings says that store sales figures were up 4.2 percent at Home Depot in 2012, while Lowes showed gains of 1.4 percent over the same period. Those growth rates should continue in 2013, Fitch says. “We project Home Depot and Lowe's will generate same-store sales growth of approximately 2 percent to 4 percent, which is slightly below our forecast for 4 percent growth in total home improvement spending this year,” Fitch states.

All in all, those trends paint a pretty picture of the U.S. housing market for the rest of 2013.

With any amount of luck, there’ll be enough paint left over for 2014.

 

Brian O’Connell has 15 years of experience covering business news and trends, particularly in the financial, health care and career management sectors. He has written 14 books and appeared on CNN, Fox News, CNBC, C-Span, Bloomberg, CBS Radio and other media outlets and in such publications as The Wall Street Journal and The Street.com. He is a former Wall Street bond trader.