All Signs Point to the Housing Recovery Staying Strong

by |

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

About Author

Harrison Stowe is a writer for NVR Inc., a prime developer of Baltimore new homes. Addressing a range of topics including investing, mortgages, and real estate, Stowe combines finance knowledge with additional experience working with Ryan Homes in the current real estate market.


  1. Hi Harrison:
    Yup, we constantly have new issues to be aware of. Now these include, as you said, the 20 somethings and 30 somethings aren’t as interested in owning as the previous generations were; many people had their credit hit hard with foreclosures, short sales and bankruptcies and the banks will probably look unfavorably on them going forward; and that always precarious unknown of impending interest rate hikes.

    It’s fascinating to look back at the shifts in the housing market – hard to guess going forward. My guess, for what it’s worth, is that things will be safe for the next year. I’m planning for interest hikes in the next 3-5 years. As always, buy conservatively and make sure your purchase works well on the day you buy it. Never bet on the future.

    Thanks for your post!

  2. Hi Harrison,

    Thanks for the thoughtful analysis and encouraging news. As an Inside-the-Beltway investor in the DC market I am very concerned about the results of the sequester on the local employment base and by association the housing market, both locally and nationally. And I’m not just reading about it in the paper – I am hearing about it from people who are starting to be directly, immediately, and negatively affected with reduced wages and reduced work weeks.

    We are in the middle of a very hot residential market in the District of Columbia where as-is homes are routinely drawing 10+ offers. One property recently pulled over 100 offers and sold for about 200k over asking price. Yup, you read that right. I’m wondering when the tipping point will come, where sequester-affected residents and prospective homebuyers collide with wildly inflated prices. I see the potential for a sharp drop in outsale in the next few months.

    I am not a risk averse person (wouldn’t be in this business if I was!) but I find it troubling that my hometown paper is trumpeting a housing recovery in one column, while witnessing the growing fallout from the sequester.

  3. jeffrey gordon on

    Hi Alison, thanks for the update on DC. My son has 3 duplexes in DC now that have appreciated well since he bought and improved them in the last 5 years. They all cash flow
    well and are in Near SE and SW where significant development has occurred or is in the pipeline to stabilize and increase values.

    I have been wondering if it might be time to relocate some of that equity, but he seems to feel there is a bit more left in the run up. He has great long term mortgages in place and has a big pile of reserves, but he is a Govvy employee so far immune to furlough etc.

    Having spent 9 months in DC during the last 5 years working on a couple of his buildings I know how crazy the economy has been compared to the rest of the country.

    At this point I find myself watching the bond market and its impact on long term interest rates, we can only go up from here, how long till they really begin to move is the only question, once that happens it may be time to update real estate investment strategies–stagflation or hyperinflation are both going to be a bear.


  4. Hi Jeffrey,

    If your son bought at a good price, is getting cash flow and isn’t over leveraged on them then I wouldn’t be as concerned. Most of the inflated prices I’m seeing are in NW and NE. I personally like close-in SE and have done some good deals there. I think it is still undervalued and am surprised that with relocation of DHS headquarters smack in the middle of SE that prices haven’t gone up more.


    • Alison,
      Great point on the cash flow. As long as you cash flow with reasonable cushion, you’ll more than likely be able to weather the market. Up, down, or sideways, it doesn’t matter. It has to make sense from day one.
      I too have seen biddings over listed price. A family member of mine took over a year to find his primary residence in the Central Valley (CA). It seems paying over listed price is quite common in home retail sales. Despite home prices rising, I don’t feel very confident in this recovery. Things are not adding up…again. Too often do I hear about business operations shutting down, layoffs, etc. Until true family units are able to buy again with sound finances (jobs, etc), I will remain more of an opportunist rather than optimistic.

Leave A Reply

Pair a profile with your post!

Create a Free Account


Log In Here