Rising home prices are helping many Americans build equity, and gain more financial security. Last year close to two million homeowners were lifted out of negative equity, reports Zillow Inc. Another one million households will find their home’s value has risen above what they owe in 2013, Zillow forecasts.
Looking at traditional benchmarks indicates that real estate is anywhere from seven to 20 percent undervalued now, states The Economist. Comparing the price of homes to both average rents and household incomes reveals that real estate remains at bargain levels.
“It also helps that mortgage rates are at historic lows and are likely to stay that way, since the Federal Reserve has promised to keep an extremely loose monetary stance for the next couple of years,” The Economist observes.
Real estate “is usually a hedge against inflation,” adds The Economist. It notes that some analysts predict property values in the U.S. will move up faster than stock prices over the next ten years. “The surprise asset class of the next decade could yet be property.”
Stronger property sales and higher prices suggest the real estate downturn is over. Folks who continue waiting to purchase probably won’t enjoy the same terrific borrowing terms and bargain prices.
Already some communities have a shortage of houses for sale, NAR reports. “Buyer traffic is continuing to pick up, while seller traffic is holding steady,” explains NAR’s chief economist. “In fact, buyer traffic is 40 percent above a year ago, so there is plenty of demand but insufficient inventory.”
Homes listed for sale are at their lowest point since April 2005, NAR adds. Over the past year the inventory of sale properties has fallen by 25 percent.
Not surprisingly, houses are selling on average four weeks faster than they did twelve months ago. Purchase contract signings also rose sharply in January, says NAR, “and have been above year-ago levels for the past 21 months.” More purchases and a limited supply of houses for sale continue to push real estate prices upwards.