Here’s the top-line news: U.S. home prices gained 10.2 percent during the year that ended in the first quarter of 2013. That number, as measured by the widely followed S&P/Case-Shiller index, is good news for a lot of folks — especially homeowners, banks, investors and real estate professionals.
A lot of factors are contributing to the stronger home prices. Mortgage rates remain near record lows. The National Association of Realtors reports that the number of previously owned homes on the market is the lowest it’s been since March 2000.
One thing that jumped out at me was the comment by Robert Shiller, co-founder of the index. Shiller argues that prices are already at what he considers “normal” levels adjusted for inflation. (It’s worth noting that Shiller feels that the downturn in recent years just took prices to where they would have been without the real estate “bubble” that preceded the crash.)
Still, it’s impressive to see the persistence of the home price increases. The March numbers mark 12 straight months of solid increases. And while there’s a lot of variation (with properties rising 2.6 percent in New York and 22.5 percent in Phoenix), all 20 cities scored gains for the first quarter. Our headquarters city of Atlanta was particularly strong, at 19.1 percent, and we were able to clearly see the improvements in our Georgia auctions.
Is it too good to last? It’s hard to say. Certainly, we aren’t yet approaching the price levels we saw in 2005. And that means there are still a lot of homeowners who are under water.
Obviously, home prices can’t continue to rise 20 percent a year for long without creating troubles down the road. But I think the direction is obvious. It’s just a matter of how fast prices move up. For now, I think we’re at a good “buy-in” point for investors, with lots of room for growth.
And it’s worth noting that prices on commercial properties, subdivision lots and many other types of properties remain very low. Investors who buy at these levels will no doubt enjoy better returns than those who wait and buy at higher prices later. Rising demand for homes is beginning to spark a healthy rise in new construction. Investors who’ve been loading up on home sites at recent John Dixon auctions can expect some handsome profits as construction moves into full swing.