The median price of an existing home that sold in April of this year was $177,400, an increase of just over ten percent from a year ago. That is the biggest price jump since January of 2006. The difference between now and then, though, is the 2006 price jump was real, this latest spike is not.
“This is a mix of home issue,” warned National Association of Realtors chief economist Lawrence Yun, who usually tries to see the positives in all housing numbers. “There is an acute inventory shortage in Phoenix, Las Vegas, Ft. Myers,” Yun explains.
As we reported here on the Realty Check last month, a lack of distressed supply, that is foreclosures and short sales, is pushing overall home sales lower. That’s because the majority of the sales action for the past few years has been on the low end of the market.
Now, as banks try to modify more delinquent loans to comply with the recent $25 billion mortgage servicing settlement, and as investors rush in to buy distressed properties and take advantage of the hot rental market, the distressed market is drying up.
The share of home sales in the $0-250,000 price range made up over 73 percent of all sales in February; that has already dropped to 67 percent in April.
If you look at sales by price category, you see the most startling evidence of this shift in what’s selling on the low end out west. Sales of homes $0-100,000 dropped over 26 percent out west in April, but rose 21 percent in the $250-500,000 price range. The national numbers tell the same story.
So what does this say about where we really are in terms of home prices nationally? The Realtors still expect overall home prices to rise just 2-3 percent in 2012, which is one of the more bullish predictions. If the banks start releasing more properties onto the market or push more delinquent loans to foreclosure, overall home prices will come down again.
The lesson to take from this report is that all home price changes now are more local and more price-range specific than ever. The jump in sales of higher priced homes is a good sign, as some had predicted that when the distress dried up, there would be no sales.
But overall inventories of homes for sale, while up for the month, are still way down from a year ago, and that means sellers are still wary of this market. Confidence and credit will be key going forward.