Wednesday, June 26, 2013

Is the Housing Market Really Recovering?

Is the housing recovery real? After the housing bubble burst in 2008 and its following economic crisis, housing prices plummeted and were at all-time lows in 2012. Recently, however, Mark Zandi, Chief Economist at Moody's Analytics, stated that, "We're in the early stages of a good run in the housing market."

Pent up demand is causing current home owners to enter the market once again and seek new homes. Jonathan Smoke, Hanley Wood's Chief Economist, posits that 30% of homeowners are tired of their current homes, causing a shift upward in demand.

Home prices have risen by about 7.4% with the median price rising to $250,000, with even larger growth rates in Athens, Georgia and Silverthorne, Colorado. As housing prices are beginning to rise again, consumer confidence has also been boosted with a 76.2 Consumer Confidence Index rating--it's highest level in over 5 years.

housing market in recovery
Source: Coldwell Banker
However, the supply of homes is at new lows, with new single family homes dropping 16% in the last year and existing homes down 18%.

This is great news, however, for the construction industry, as construction unemployment has decreased 43% since 2010 to meet this rising demand and shortage of available homes. The housing market is seeing significant growth once again, as new home starts are up 40%, with great gains in California; Sarasota, Florida; and Las Vegas, Nevada.

Despite this growth, consumers must be careful. Homeowners are still hesitant in selling their homes, waiting for prices to peak again as they did in 2007 before the housing bubble burst. Additionally, purchasing new homes is still unrealistic for many as the job market is still stagnant. The housing recovery may be slow and hindered by other factors, but as the markets across the country are showing growth once again, we can confirm that the recovery is indeed real.