National Home Prices Rise and the Overall Market Improves
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According to the National Association of Home Builders/First American Improving Markets Index (IMI), the number of improving housing markets across the country increased to 259 in February, up from 242 in January. The index measures three indicators―employment growth, house price appreciation, and single-family housing permit growth. This is the sixth consecutive month the index has risen. What's more, the rise was seen in markets from all 50 states and the District of Columbia; the housing recovery is not confined to just one region, but is expanding across the country.
Metro Area Home Prices Climbing
Out of all 152 metropolitan statistical areas (MSAs), 133 reported an increase in the median existing single-family home price in the fourth quarter of 2012 when compared with the same quarter from a year earlier. In comparison, only 29 MSAs showed an increase in the fourth quarter of 2011. The causes for such widespread price growth were varied―mortgage rates are near record lows, job creation is up, and buyers are itching to move out of their rentals. The increase in demand, along with a low inventory, is driving home prices up.
Housing Affordability Higher Than Ever
Despite the rising home prices, the National Association of Realtors (NAR) Housing Affordability Index climbed to a record high. The index measures the purchasing power of median-income households; an index of 100 indicates that a household can afford a median-priced home with a 20 percent downpayment, assuming 25 percent of the household income goes toward the mortgage. This year's index is well above the 100 benchmark; it rose to a record-high 193.5, up from 186.4 in 2011. Home buyers have almost double the income they would need to purchase a home. NAR economists believe the index will average 161 in 2013, meaning homes will still be affordable in the year to come.
Keeping the Momentum Going
The current stringent mortgage standards are preventing many buyers from entering the housing market. Loosening conditions will allow more buyers to achieve their home ownership dreams, in turn improving the market conditions in those areas that didn't make the IMI. The growing population is also putting pressure on the market; to keep supply and demand in check and home prices from overheating, new home construction needs to become a priority.
