All Signs Point to the Housing Recovery Staying Strong

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While returns from the past three quarters have all shown mounting health in the housing market, it remains undetermined how successfully (and how lasting) the property sector recovery will be. As I’d noted in a prior post, there was a slight dip in housing starts in January despite the preceding months all showing incremental rises above the prior period. There’s even been discussion as to whether hedge fund manipulation and overall market trends are mimicking those that ultimately resulted in the housing bubble, with some analysts urging caution around quick moves towards new investment.

However, new reporting from the Washington Post notes that economic health metrics throughout the property sector remain strong. Despite concern that the recovery remains fragile, the Washington Post article discloses that not only do home prices continue to rise nationally, but also the acceleration in new home sales remains above those recorded during Q1 2012. Deriving economic data largely from the S&P/Case-Shiller Home Price Indices, the story lays out that in the one-year period leading up to January 2013, home prices rose 8.1% nationally.

The report points out that particular urban markets saw exceptional value gains, with homes in especially depressed local markets continue to demonstrate strong growth metrics. Home prices in the hard-hit California markets of San Francisco and Los Angeles rose 17.5% and 15.3% respectively. This is especially promising as a sign that the nationwide housing market is evening out and that the rebound has smoothed some of the rough patches in America’s property sector. As a comparative, the Washington Post also notes that the much more even Capital Beltway property market rose only by a gentle 5.9% in property values over the same period.

What This Means for Homeowners

So what does this mean for homeowners and property investors? This stands as hard data validation that the housing recovery is likely sustainable, at least for the immediate future. The number of distressed properties and underwater mortgages has continued to dwindle, which only bodes well for the value of American property going forward. Considering that privately held toxic real estate equity had long dragged down the housing market, it seems that we’re in the clear as far as mortgage-related roadblocks are concerned. The foundations for economic growth seem well in place, and this evaporation in distressed property is exceptionally promising when coupled in the mounting constriction in sales volume.

While long-term projections about the housing market remain difficult, it seems increasingly safe to assume the market will continue gentle growth throughout the remainder of 2013. We also appear to be standing at a point where growth investments in property may be ideal. Considering that the shadow inventory has decreased substantively since the opening of 2012, another major culprit in the suppression of home values has been removed as well.

Future Concerns?

In surveying the property landscape, one of the remaining concerns seems to be the demographic challenges that the housing market may face in the future. The current generation of 20-somethings and young 30-somethings are uniquely hesitant to put down for a first home, with their professional futures more uncertain and debt burden heavier than that faced by their age group at any other point in the past thirty years. Naturally, this has lad to concerns that a lack of demand could cause hiccups down the road. That being said, it seems like we’re looking at smooth sailing for at least the immediate future.
Photo: Tambako the Jaguar

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.