Home Prices Climb In December, Best Yearly Gain Since 2006...

February 26, 2013 9:30 AM ET

NEW YORK (Reuters) - U.S. home prices picked up in December, closing out 2012 with the biggest yearly gain in more than six years as the housing market got back on its feet, a closely watched survey showed on Tuesday.

The S&P/Case Shiller composite index of 20 metropolitan areas rose 0.9 percent in December on a seasonally adjusted basis, topping expectations for a gain of 0.5 percent.

Prices in the 20 cities jumped 6.8 percent year-over-year, ahead of expectations for 6.6 percent and the best yearly gain since July 2006.

"I expect the home price rise to persist in 2013," said Michelle Meyer, senior economist at Bank Of America Merrill Lynch in New York.

For the final quarter of the year, prices gained 2 percent on a seasonally adjusted basis. On a non-adjusted basis, prices were up 0.2 percent in December.

Last year housing contributed to economic growth for the first time since 2005 as the sector began to recover from its far-reaching collapse. Still, the market is far from fully healed, with over 20 percent of mortgages underwater and foreclosure rates still elevated.

Prices have been rising since last February as the supply of available homes for sale tightened in 2012, helping to stabilize home values. Investors buying cheap homes to be converted into rentals also supported the market and some hard-hit areas saw a sharp bounce back in prices. Phoenix, for example, saw gains of 23 percent compared to December 2011.

"While the economy faces challenges from the fiscal cuts, the housing market is on a good footing due to low inventory, slow clearing of foreclosure, steady household formation and more easing of mortgage credits," said Meyer.

Atlanta and Detroit racked up their biggest yearly increases since 1991, when they were first tracked. Prices in the cities climbed 9.9 percent and 13.6 percent, respectively. New York was the only region to decline on a yearly basis, down 0.5 percent.

U.S. stock index futures saw little reaction to the data, with Wall Street set for a higher open, while the dollar extended losses against the euro.

(Reporting by Leah Schnurr, additional reporting by Richard Leong; Editing by Chizu Nomiyama)

Would You Buy Near the Friendly Rails?

"Transit-oriented development" sounds like a solution to a variety of urban problems. If people could live and work within walking distance of a train or bus stop, people could save money on gas, people without cars could commute more easily, neighborhoods could reduce congestion and pollution, and economic growth could follow.

Generally, it makes sense for cities to invest in the hubs that connect people and the places they need to go. However, not every rail stop is equally primed for a new apartment complex or retail development, and determining why is a significant challenge. For example, there is little sense in pushing transit-oriented development in a community where every household already has multiple cars, and likewise there is little sense in developing stops in areas divided by highways and mega blocks where people are unlikely to walk to a train.

In early February, the Center for Transit-Oriented Development released a study of more than 100 transit stops in the Pittsburgh area, assessing the suitability for transit-oriented development. A quarter to half of the station areas in the system could benefit from a small infrastructure investment, such as a pedestrian bridge or tunnel, signage showing where the station is, or paved pathways or sidewalks. The assessment uses pentagonal graphs to illustrate ways that density, land use, care dependency and distance all shape communities differently.

"It’s a very simplistic way of measuring what you need," says CTOD director Abigail Thorne-Lyman. "But if you don’t have the resources to even know where to begin, it’s very powerful to say ‘I’m just going to look at these five things, and what do I need to improve to push myself into a more transit-oriented urban form?'" 

Source: "The Geometry of Transit-Friendly Neighborhoods," The Atlantic Cities (02/11/13)

Why rising housing prices are a good thing (for both Buyers & Sellers)...

By Dave Zitting, ksl.com Contributor

SALT LAKE CITY — As consumers, we are taught to seek out bargains, discounts and good deals. Paying less is better, right? So why are we celebrating rising housing prices and continuing to hear it is a good time to buy? In his State of the Union address last week, President Obama talked about the housing sector and its recovery since the collapse in 2007. For many of us, what happened then and what is happening now is nebulous and can be hard to understand. But, in light of the collapse, we, as a nation, can celebrate our subsequent recovery and rising cost of homes.

The collapse

Simply put, in 2006 and 2007 many banks and lenders were playing fast and loose with the mortgages they were dolling out. In order to close deals, they were promising payments from buyers without the due diligence of making the sure the buyers could actually pay. And sadly many couldn't. Foreclosures increased and the value of homes dropped dramatically.

The recovery

In addition to putting more compliance measures in place to regulate how and to whom mortgages are given, both the federal government and the private sector stepped up to artificially stimulate the housing economy. This happened in two ways. This gets a little complex, but stay with me…

1. Mortgage bonds. The Federal Reserve purchased (and continues to purchase) mortgage bonds which created a ripple effect resulting in lower interest rates. By purchasing the bonds, the federal government made more credit available and at a reduced cost. Thus, the lower interest rates.
2. Shadow inventory. After the collapse, the number of available homes to purchase due to the number of foreclosures could have been very high. Luckily, major investors have purchased a significant portion of the inventory to rent out until the housing market recovers completely and they can sell the homes at a profit. By purchasing these homes, it has kept the supply of homes low. We know when supply is low, demand is high. And high demand fuels the economy.

So, now, we have lower interest rates and high demand. But, still, how are these increasing prices good for buyers?

Affordability

If there is one good thing about the drastic reduction in the cost of homes, it is that they became very affordable. Think back to the good deals conversation earlier. And although we are now seeing a solid recovery, including the increase in the cost of homes, we have a long way to go before they reach their pre-collapse prices, and even further before they become unaffordable. In fact, according to the S&P/Case-Shiller Home Price Index, the increase in home prices we have seen as of late only gets us a fraction of the way back to where they were prior to the financial crisis. That's why we refer to this as a "recovery," because we are in the process of getting back to where we once were. In the meantime, we are continuing to enjoy home prices and mortgages that are oftentimes less than the cost of renting.

Investment

In addition to being the roofs over our heads, our homes are investments for us. So think of it like buying a rare collector's item. As time goes on, you would hope your item increases in value so some day you could turn around and sell it for more than what you paid for it. Homes are the same way. For those who purchased their homes as the market was collapsing, their homes are now worth less than what they owe. For them, selling at this point would cost them money instead of make them money. However, for those buying homes today, the value of their home is increasing as home prices rise, making their home a productive investment.

Economy

Lastly, because so much of our economy hinges on the success of our housing market, to see it recover means good things for the rest of our economy. In fact, as President Obama said in his speech, home prices are not only rising, but rising faster than they have in six years. So for those of us to own homes, our investments are becoming more valuable. For those who are looking to buy, they can take advantage of low home prices, low interest rates and the ultimate joy: homeownership.

Dave Zitting is the President and Chief Executive Officer of Primary Residential Mortgage, Inc.

CoreLogic: Home Prices Post Largest Gain in 6 Years

Home prices, including distressed properties, soared by the largest gain since May 2006, rising 8.3 percent in December on a year-over-year basis, according to the latest housing figures from CoreLogic. This is the tenth consecutive month for increases in nationwide home prices, according to CoreLogic.

When foreclosures and short sales are excluded from the mix, home prices rose 7.5 percent year-over-year, according to CoreLogic. 

Nearly every state posted gains in December, except for Pennsylvania, New Jersey, Illinois, and Delaware. 

The following states posted the highest gains in December in prices, when including distressed sales: 

1. Arizona: 20%
2. Nevada: 15.3%
3. Idaho: 14.6%
4. California: 12.6%
5. Hawaii: 12.5%

“We are heading into 2013 with home prices on the rebound,” says Anand Nallathambi, CoreLogic president. "All signals point to a continued improvement in the fundamentals underpinning the U.S. housing market recovery."

Source: CoreLogic

* Our Utah Market saw a a December growth of between 4.6% - 6.9%. 

How Real Estate May Save an Ailing Job Market

The overall economic recovery is betting big on real estate’s continued progress. After all, a stronger real estate market can lead to a stronger job market. 

Strength in the real estate sector tends to lead to increased hiring in various housing-related industries, from carpenters and landscapers to real estate agents, loan processors, appliance manufacturers, furniture makers, and more. 

When it comes to job creation, "the most promising news is related to the housing market," says John Challenger, CEO of employment consulting firm Challenger, Gray & Christmas. 

The construction sector for housing added 28,000 jobs in January alone. 

"Since reaching a low in January 2011, construction employment has grown by 296,000, with one-third of the gain occurring in the last four months," according to the Bureau of Labor Statistics.

The National Association of Home Builders says that for every home start, three new jobs are added in industries such as lumber, concrete, lighting fixtures, and lending. 

If the housing market rebounds to its historical average, the economy could generate 2.9 million direct jobs from it, according to the Bipartisan Policy Center, a Washington think tank. 

Source: “Jobs Still Lag, But Homebuilding May Soon Help,” NPR (Feb. 1, 2013)