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Home Buyers \ October 17, 2013 10:24 am
A recent report by FNC revealed that the housing market continued its recovery in August with home prices increasing by 0.6 percent compared to the previous month. Prices rose to levels last recorded during December 2009 and have improved for the last 18 consecutive months.
While the growth is nominal, the figure reveals that the housing market is recovering at a steady rate that will ultimately lead to a more stabilized economy if it continues its upward trend. Compared to a year ago, home prices were up 5.3 percent nationwide, though some areas experienced growth at a much more rapid rate. Phoenix led the country with a price jump of 24.5 percent in August compared to the same month last year.
Market stabilization with slow, steady growth
While the market has seen a slight decline in its growth in August compared to other months, the government shutdown is not to blame . Seasonal selling during the summer months before school starts usually results in more sales than any other time during the year. With seasonal selling over, a slowdown in home sales is not only typical, but anticipated.
Last year, home sales remained strong after seasonal selling ended due to a continued investor presence in many markets, according to The Wall Street Journal. However, many have pulled out of hot market areas after home prices skyrocketed in cities like Phoenix and Las Vegas.
Investors were a big help in the real estate economy, as some development firms purchased several properties below market values in all-cash transactions with the intent to rent the units. As these sales improved the housing market, prices rose and investors were no longer finding the same types of deals. According to The Wall Street Journal, all-cash purchases dropped to 33 percent of all sales in Phoenix during September compared to the previous month, down from 44 percent last year. Las Vegas transactions with all-cash sales fell to 47 percent in the same time, compared to 55 percent the previous year.
Part of the reason sales have slowed is that Americans are having a harder time purchasing new homes compared to last year. Higher interest rates in May had an impact on buyers who saw monthly payments rise quickly, deterring some from applying for a new mortgage. While interest rates are still below historic norms, the jump of nearly 1 percent from 3.5 percent to an average of 4.5 percent for 30-year fixed mortgages was a sharp increase.
While higher home prices is a good indicator the housing market is improving, the price spikes may have been too high for some hopeful homebuyers, The Wall Street Journal reported. Sellers are also finding that with fewer buyers, prices need to drop. According to a survey by Redfin, 62 percent of real estate agents believed that sellers had unrealistic expectations about the value of their homes. Buyers who are paying market value are having a hard time getting the value of their purchase to equal the appraisal of the home. Redfin reported that 30 percent of agents indicated sellers are unable to get their home to appraise for the contract value.
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