CNN reports housing prices posted another large increase in October, although experts suggest the rise may be tapering off and topping out in the next few months. According to reports, S&P/Case-Shiller home price index was up 13.6% compared to a year ago. This housing prices increase is the highest since early 2006. The good news is housing prices have been increasing almost every month for the last 2 years.
Next year, however, the housing prices gains are expected to slow as we enter 2014. Experts believe the gain may be mere single digits, rather than the rapid rise we have seen this year. In fact, according to David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices, the recent housing data suggests we may have reached “peak housing prices gains.”
Is housing prices potential slowdown good or bad?
The slowdown should be welcomed, according to Stan Humphries, chief economist for price tracker Zillow. “Consumers looking at more recent reports should embrace this slowdown, as it will make for a more balanced market in 2014 and beyond,” he said.
The housing recovery has been a major contributor to the improvement in the United States economy, and it has been helped by a decrease in unemployment and a slowdown in home foreclosures. Both of these factors combined have made many families eager to purchase a new home.
Tight supply of available homes, however, has driven the housing prices up. Many families have also been hampered by their inability to sell their homes which may still be underwater. Other areas have also slowed their homebuilding efforts, leaving many parts of the nation with limited homes for sell.
Also impacting home purchases is the steadily rising interest rates. Many homebuyers are attempting to buy homes before the record low interest rates increases above the 30 year low they hit this past spring. Currently, many homebuyers with a good credit score can get a 30-year loan for as low as 4.48%.
Did all states see housing prices improve?
The good news is home price gains have been seen in markets throughout the United States. In fact, there have been good improvements in all 20 major markets tracked by the index posting. For instance, New York has seen prices increase an estimated 4.9% in the last year. Las Vegas, which was hardest hit by the housing crisis, posted the largest gain at 27.1%.
One especially bright spot is Chicago where Chicago-area home prices rose 10.9 percent in October from a year ago, the best showing for the local market since December 1988. The home prices in Chicago are comparable to the levels they were at in February 2003 level before the housing crash and post-crash, in December 2009. Other cities such as Cleveland and Washington have also had significant housing improvements.
So while the gains are great news, many contend they are not likely to continue. David Blitzer, chairman of S&P Dow Jones Indices’ index committee, reinforced this prediction, “Monthly numbers show we are living on borrowed time and the boom is fading.”
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