Home Prices are on the Rise
Home Prices are on the Rise
The home price index
The recession is officially over according to experts and now is the time to watch home prices rise. For a long time house values declined causing much stress for homeowners. A new study however, just revealed that for the fifth month in a row US home prices moved upward. According to the Standard & Poor’s/Case-Shiller, the home price index edged upward about 0.4% from September to October. Economists are predicting, however, that there is a winter decline still to come due to the hefty number of foreclosures entering the market and a decrease in government aid. Dean Baker, co-director of center for Economic and Policy Research said, “I’d be very surprised if we don’t go below the lows we hit this year. We still have a very glutted housing market.”
Variations in the market
One of the reasons the US market is still difficult to predict is the varying conditions of cities. For example, Denver and Minneapolis have seen price increases over the past six months. On the other hand Chicago and Florida have seen numbers falling steadily since August. One of the key indicators to watch however is the home price average. Dr. Michael Firesethe, of Harvard School of Economics, said, “Many of the predictors of the market can be tied to public perception. When home values are on the rise, people tend to feel more secure. When they are more secure, they start spending more money.”
Consumer confidence is a huge factor when it comes to gauging the market for success. Two main issues with consumers are the unemployment rate and home values. Now that home values are fluctuating, but moving up slowly, it’s unemployment that people are watching closely. Although the unemployment rate is still high, it grew in December at a slower pace than it has for the past six months.
The real estate market
The real estate market’s performance is really the number one indicator of how the economy is changing. To encourage home buying, the government created a federal tax credit for first-time home buyers. There were thousands of buyers who rushed to close their deals prior to the November 30th deadline. Watching how much activity there was in sales of homes, it’s easy to see how eager people are to take advantage of tax credits. Because of the rush to close on homes, the government extended the tax credit through April 30th.
In addition to the first-time home buyer credit, there is also a program that includes homeowners who relocate after living in one location for five or more years. This credit is up to $6,500. Consumers understand that now is a great time to buy if they can get a loan and many are taking advantage of the “buyer’s market” that the recession created. To keep interest rates low, the Federal Reserve also bought up $1.25 trillion in mortgage-backed securities. The government is doing all it can to continue the growth of the real estate market and push the economy back to a position of positive growth.