The real estate recovery story certainly comes with caveats such as low interest rates and inventory levels, but a number of indicators all point in the same direction: Home prices are recovering, more mortgages are emerging from underwater, and sales remain strong.
We’ll go through some evidence of the recovery, but it’s worth pointing out that several industry watchers are growing cautious of all the upward movement. “Enjoy it while it lasts,” commented Zillow Chief Economist Stan Humphries in a press release in June, “because the housing market will undoubtedly look very different a few years down the road from how it appears now… While we believe the housing recovery will remain strong, home value appreciation will slow down, and buyers in it for the short term could get burned if they assume home values will continue rising as they have unabated.”
With that in mind, here’s how the housing market is doing:
1) New home sales are rising
The U.S. Census Bureau reported at the end of June that purchases of new homes, measured by contracts signed, increased 2.1 percent to a seasonally adjusted 476,000-unit annual pace in May, compared to the revised April rate of 466,000 units. That was the best level since July 2008. Home sales were up 29.0 percent compared to a year earlier.
The seasonally adjusted estimate of new houses for sale at the end of May was 161,000 units. This represents a supply of 4.1 months at the current sales rate, near record lows. The all-time high for supply hit 12.1 months in January 2009.
The Commerce Department also reported that the median sales price of new houses sold last month was $263,900, higher than $239,200 a year earlier, but down from the record high of $271,600 in April. The average sales price came in at $307,800 for May. Although low interest rates and inventory levels have been supporting the real estate market, the average sales price of $279,900 in March was the lowest since June 2012.