Strengthening prices

Last week strong financial reports drove up the stock market to a new high, and that’s not just good news for those invested in the market, but it also creates an impact for those watching the housing market.

Yields on the benchmark 10-year Treasury note also rose to their highest level in over a year. Nationwide, home prices climbed during the first three months of this year and at a faster rate than in approximately seven years.

The housing market recovery coupled with an improving consumer confidence report, is fueling a debate within the Federal Reserve (Fed) about how to ease monetary policies. Those policies include an $85-billion-a-month bond-buying program that has contributed to low mortgage rates, increasing asset prices and improved employment and spending. Some members of the Fed are contemplating phasing out these policies.

The Fed wants the economy to be self-sufficient without the purchasing of bonds. The concern is the economy has previously stumbled and may not be able to sustain the recovery.

This past March, home prices increased 10.2 % from where they were in 2012. This was the largest increase since 2006.

The Conference Board, a private research firm, reported that consumer confidence in May increased to the highest level since February 2008, which was before the economic meltdown later that year.

According to building consultants in California, at existing interest rates homes would still be affordable even if prices increase by 20% from their existing levels.

Industry analysts believe that lower interest rates are enabling the real estate market to recover.

Rising home prices are being seen because the bottom of the real estate market has been reached and now prices are climbing as they correlate to incomes and rents.

Investors scooped up a large number of distressed properties and this was followed by rising rents, low mortgage rates, and improving consumer confidence. The result of these developments is what we are experiencing now, which is a pent-up demand for homes.

Rising home prices fuel consumer confidence and the overall economy as homes represent one of the largest investments in personal portfolios. The rising home prices also relieve homeowners who were owing more on their mortgages than their home’s market value. If homeowners increase their equity positions, they will be more likely to list and sell or refinance.

As most home price indexes include distressed properties, rates of price increase are skewed. The number of distressed home sales has decreased over the past year, especially in California, Nevada and Arizona. Distressed properties, typically, sell at a discount, and prices tend to appear worse as the percentage of foreclosed property sales rises and appear better as the percentage of foreclosed property sales decreases.

The inventory of available homes for sale continues to remain low in Greenwich and there is a shortage of land parcels for sale. Builders through their Realtors are selling homes off plans. Sellers are expediting renovations hoping to list sooner than later.

 

Mary Ann Clark is a Realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed to [email protected] 

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