By CONOR DOUGHERTY
Cities in
the West and the Sunbelt, among the hardest hit during the real-estate
downturn, continue to lead the nation's housing recovery—posting double-digit
gains in home prices that have outpaced even the most optimistic projections
from a year ago.
In the
second quarter, median existing-home prices increased in 142 of the 163
metropolitan areas tracked by the National Association of Realtors, according
to a survey released Thursday. Among the 10 cities with the fastest
year-over-year price growth, nine were in California, Florida or Nevada—states
that were hammered by the grinding real-estate bust that persisted from 2007
until last year.
Some of
the biggest standouts were in California. The Sacramento area led the nation
with a 39.2% increase in year-over-year prices. The San Francisco and Los
Angeles metropolitan areas also were in the top 10 in terms of home-price
gains.
While
formerly hard-hit places are thriving, the entire U.S. housing market is far
better off than it was a year ago. Nationally, the median existing-home price
rose 12.2% in the second quarter from a year ago, to $203,500. That was the
strongest year-over-year gain since 2005, during the throes of the
pre-recession real-estate bubble.
The
fastest growth was the West, with 18.2% price growth, followed by the South
(11.0%), the Midwest (7.9%) and the Northeast (6.9%).
There was
as an average of 5.1 months worth of existing home supply in the second
quarter, down from 6.4 months in the second quarter a year ago.
The
turnaround has been driven by a combination of better job growth and a tight
supply of homes for sale. There also has been a reduction in the number of
foreclosures, which drag on prices. Homes sold under financial duress, such as
a foreclosure or short sale, accounted for 17% of second quarter sales, down
from 26% a year ago, according to the realtors' group.
From
quarter to quarter, the survey can be unreliable because it measures median
prices and can result in overstated gains and losses as the mix of homes shifts
between the higher and lower ends of the market. That likely is happening now,
as there are fewer lower-end homes, such as foreclosure sales.
But
there's no question the housing market is profoundly better than a year ago.
Economists and housing analysts expect prices to continue rising. Many of the
driving factors, such as tight supply, fewer foreclosures and pent-up demand
from buyers who sat out the market during the past few years, are unlikely to
turn around soon.
That
doesn't mean the torrid increases of the past year will be repeated. Inventory,
while still tight, has started to edge up as more homeowners, enticed by higher
prices, put their homes for sale. Interest rates, while still low, are rising.
And investors, whose mostly cash purchases were the spark that ignited the
housing rebound, are starting to pare back their purchases.
Indeed, a
number of peripheral housing indicators are already showing a slowdown. Asking
prices fell 0.3% in July, the first month-over-month decline since November of
last year according to a report released earlier this week by Trulia, a
real-estate listing site. Meanwhile, Redfin, a national real-estate brokerage,
reported that the number of people taking home tours fell slightly in June.
This may foreshadow a long-expected slowdown in price growth.
In the
supply-starved West, the heady competition among buyers is prompting prospective
buyers to put off vacations so they can continue house-hunting in the summer
months when traffic typically tails off.
"They
can be ready to act and jump on any property that comes on," said Jordan
Clarke, a San Diego-based Realtor with Redfin.
Many
shoppers are taking unusually personal measures to stand out from the pack. Two
of Mr. Clarke's clients, David Larson and Janna Alfery, recently closed on a
four-bedroom, $1.15 million home in Encinitas, Calif.
The early
30s couple had been looking for a home for three months and in that time looked
at roughly 50 places, they said. To get the home they live in now, they wrote
the sellers a personal letter that, among other things, noted the coincidence
that they are both doctors and the home was on Hygeia Avenue, named for the
daughter of the Greek god of medicine. Later, they had a wine-and-cheese
gathering with the sellers and even introduced them to Mr. Larson's parents.
The offer
still almost fell through when a rival buyer offered $100,000 more, but that
bid eventually fell through.
"It
felt like miracle," Mr. Larson said.
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