Recent record-breaking home values in 26 percent of the country’s housing markets are both a sign of recovery and another barrier for home buyers as they head out into this season’s competitive housing market.
San Francisco and San Jose shattered their median home-value records months ago. But more recently, markets in the South and even the Midwest and Northeast have also surpassed bubble peaks and clocked some of the highest median home values on record for their markets.
Nearly half of all housing markets that recently reached new peaks were in the South, led by hot markets in Texas and Tennessee.
Low inventory drives up prices
Across the country, the number of homes listed for sale is much lower than it was a year ago, which means buyers’ options are limited. Even if a buyer has a down payment, finding a house can be incredibly difficult. In Portland, OR, inventory is down 28 percent, while home values are at an all-time high, up 13 percent.
Limited inventory means increased competition for those homes that are available, spurring bidding wars and pricing out entry-level buyers. For first-time buyers, rising home prices and high monthly rental payments are making it difficult to save for a down payment to compete with trade-up or all-cash buyers.
Are we in another housing bubble?
The record-breaking home values have some experts worried about a new housing bubble, particularly in hot markets like San Francisco, Seattle, San Diego and Los Angeles. San Francisco and San Jose have been appreciating at a double-digit pace for several months, and Denver has been appreciating at this pace since the end of 2013. Many view this as an unsustainable pace of appreciation.
The job market is hot in tech hubs like San Francisco and Seattle. With increased competition for homes in these markets, low inventory and high home prices start to have a real impact on renters looking to enter the housing market.
Returning to normal
The good news about rising home values is that fewer homeowners owe more on their mortgage than their homes are worth. When those homeowners are no longer underwater, they can sell their homes, raising inventory. More homes on the market means more options for home buyers. It also means we are that much closer to a “normal” housing market, where home values reach new records each month.
“These new records mean we’re no longer making up ground lost during the housing recession,” said Zillow Chief Economist Svenja Gudell. “Instead, we’re laying a new path forward, based on demand for housing and economic growth throughout the economy. In some ways, the housing market has seen a return to normalcy, and these markets are well on their way. In an ideal world, they’ll set a new record home value every month as their home values rise at a normal pace. The fact that some markets are still off by double digits just highlights how extraordinarily inflated home values had been during the housing bubble.”
Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, [email protected] or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings.