Residential property prices are soaring beyond expectations in many markets in the US with analysts and market observers starting to talk about a recovery and growing confidence in the real estate sector.
Many are eagerly talking about a slowing of declines in home sales and median sales prices across the US. Phrases being used include ‘housing bottom’ and ‘recovery in sight,’ with several financial institutions going so far as to tell shareholders the recession itself is at an end.
Others are more cautious. For example, even although Radar Logic’s RPX Monthly Housing Market Report showed three months of stability in the composite home prices, its chief executive officer Michael Feder has been reluctant to use the word ‘recovery’.
In a special report published last week the real estate data and analytics provider acknowledged the encouraging signs of stability in house prices, but refused to be explicit on whether or not the bottom of the market has been reached.
Radar Logic pointed to home prices soaring in many markets beyond the expected levels, given historical seasonal patterns. This trend suggests price increases seen recently are due to something beyond simple seasonal swings.
Along with strong gains in prices studied by Radar Logic, housing starts increased continually since the beginning of the year. Existing home sales rose steadily through the year and new home sales are also on the rise since March, indicating the gain in home sales is not due only to high foreclosure resales as buyers work through foreclosure inventory.
‘While houses may sell at a discount from their peak values for years to come, the return to normal seasonal patterns suggests that sustainable appreciation could return to the market soon. Attitudes have changed dramatically since last winter and the fear of many investors has turned to optimism,’ the report says.
But the question remains whether the trend will continue through the approaching winter and the expected seasonal downturn, Radar Logic analysts said. Buyers tend to retreat for winter and remain on the sidelines until February, when volume usually picks up again.
So prudent observers like Feder are waiting until winter passes to make judgments on the market, as any current recovery trends should become more apparent between now and next buying season.
‘A positive sign to look for is a winter home-price decline that is less severe than would be expected given past seasonal price patterns. This would indicate that consumers’ confidence in the housing market is strengthening and that a strong upcoming buying season could be on the way,’ the report concluded.