Most people aren’t looking to move during the holidays, but the average home that’s on the market during this time will slash its price somewhere between $2,000 to $10,000, according to Graham Wood of AOL Real Estate. But, record low mortgage rates push higher home price recovery in more than 2 years.
Dean Baker, the co-director of the Center for Economic and Policy Research who was one of the earliest economists to warn about the housing bubble and the trouble that lay ahead, said this recovery in the housing market should lead to some sustained housing price increases in the coming years.
Home values rose by 1.1% from September through October, the largest monthly gain in seven years. Nationally, home values were up by 4.7% from one year ago, with some 26 of 30 markets seeing rising values, led by Phoenix’s gain of 22.3%, San Jose, Calif. (11.4%), Denver (10.4%), San Francisco (9.5%) and Miami (8.8%). The only cities with year-over-year declines included Atlanta (-2.4%), Chicago (-2.1%), New York (-1.2%) and Philadelphia (-0.9%).
The 30-year fell to 3.31% from 3.34% last week, according to Freddie Mac (FMCC, Fortune 500), the government controlled mortgage backer. The 15-year rate averaged 2.63%, compared with 2.65% a month ago. According to Keith Gumbinger, vice president of mortgage information company HSH Corp., the current conditions mean it may make sense for current mortgage borrowers and new homebuyers to look at shorter-term loans. he said. “To really rack up savings, you might also consider a purchase or refinance using a loan with a term shorter than the traditional 30 years.”
Those trends are pushing up home sales and construction. Sales of previously occupied homes are near five-year highs, excluding temporary spikes in 2009 and 2010 when a homebuyer tax credit boosted purchases. Home prices are now back to where they were in early 2003, before the housing bubble inflated over the next three years before bursting. Even with the recent gain, the national index is down 28.6% from the peak level reached the first quarter of 2006.
A measure of confidence that this recovery will endure is that building permits rose to the highest level in six and a half years this month. And, builders broke ground on new homes and apartments at the fastest pace in more than four years.