As the demand for housing in the U.S. continues to rise, home prices have risen with it. According to a recent report from Standard and Poor's/Case-Shiller, the end of February marked a significant increase in home prices across the nation. The statistics showed a 9.3 increase in the index's year-over-year analysis - the largest home price increase since 2006.
For more than six years now, home prices have been recovering. However, the current figures indicate that the increase isn't just due to improved market conditions and economic recovery, but also because of an unusual imbalance in supply and demand. With the plethora of foreclosures, short sales and other distressed properties having been scooped up in the last few years, home prices were finally given the chance to bounce back. Unfortunately, the rate at which new homes and resale properties come into the market has been slow to keep up with this rising demand.
According to an April article in the Wall Street Journal, the winter months of 2012-2013 brought unusually high levels of home buying activity as well as jumps in home prices. While the months of December, January and February are typically sluggish when it comes to real estate, such was not the case at the end of 2012 and into 2013. In the markets examined by the index, home prices hit a low point a year prior, which set the market up for some of the biggest increases. However, it should be noted that while these increases were significant, prices overall remained fairly below market peaks. So for those who are waiting for another housing boom, the wait may be longer than anticipated. Home prices are certainly gaining momentum, but they continue to remain relatively affordable - which is great news for anyone considering buying right now.
The Case-Shiller information predicts that based on the current number of sales, the U.S. has an approximate 4.7 months supply of available homes on the market. This represents the lowest level of supply in eight years.
Other factors that are thought to be contributing to the growing demand include rising rents, continuing low mortgage rates, and the rapidly declining foreclosure discount (the average amount of money a person would save by purchasing a foreclosure as opposed to a typical property).
In some areas, demand is so high that certain communities have opted to organize lotteries for interested buyers. According to a recent report from CNN Money, some of the nation's hardest hit markets are now considered real estate hot spots, with highly motivated buyers eager to snatch up proerty while prices are appreciating. In an effort to make things fair and to avoid tense bidding wars, some of the communities in these markets chose the lottery method - and buyers seem to like the idea.
Here's an excerpt from a recent blog post from my company's blog that explains how the idea came about:
"Northern California building firm, O'Brien Homes, discovered that enthusiastic prospective buyers were camping out in hopes of scoring homes in their condominium complexes. Apparently the demand is so great that even qualified buyers with down payments in hand felt a need to take drastic measures in order to secure a spot. During an ongoing development, around 10 new condo sites would come available each month. For those 10 sites, nearly 50 buyers would apply for the opportunity to buy. In an effort to be fair, O'Brien began the monthly lottery."
The blog also points out that since the lottery program began, home prices in this particular development experienced a 32 percent increase. While this is terrific news for the owners, buyers who want in on the program may be facing some frustration. Nevertheless, a lot of buyers seem pretty keen on the idea of a lottery. The lottery program offers less hassle of going back and forth with offers, and eliminates the frustration from being outbid by other buyers.
Marcia DePlaza, president of GL Homes in Boynton Beach, FL explained that "buyers seem to prefer the lottery system to competitive bidding or trying to be the first in line when a home goes on the market."
And it comes as little surprise that this method of home selling is gaining popularity in other states as well. In addition to California and Florida, states such as Arizona and Virginia have also adopted the lottery method.
Be sure to check back again for the latest in real estate and mortgage news.