The real estate market continues to send mixed signals. Home sales are rising. They were up 11% in the third quarter from the same period last year to a 5.3 million-a-year annual pace.
The sales are coming thanks to a lot of financial incentives. Thirty year mortgage interest rates remain near record lows at 5.1%. Uncle Sam continues to write $8,000 tax credit checks to first time home buyers. “The buying conditions this year are the most favorable on record dating back to 1970,” says Lawrence Yun, chief economist for the National Association of Realtors.
Nearly one-third of those sales though are foreclosed homes trading at distressed prices. They are dragging down prices nationally. The Realtors association reported today that prices fell in 123 out of 153 cities tracked in the third quarter.
What about the thirty cities where home prices rose? They are places better known for affordability and stability than surging prices.
The largest single-family home price increase in the third quarter was in the Cumberland area of Maryland and West Virginia at $122,100, up 19.2 percent from the third quarter of 2008. Next was the Davenport-Moline-Rock Island area of Iowa and Illinois, where the median price increased 14.3 percent to $115,600, followed by Oklahoma City, at $144,100, up 9.1 percent from a year ago.
The biggest sales gain between the second and third quarters was in North Dakota, up 42.3 percent; followed by Rhode Island which rose 26.5 percent; and Pennsylvania, up 25.6 percent.
It’s likely that buyers in rural areas that didn’t see a tremendous surge in prices see the low interest rates and tax incentives as a good buying opportunity.
Here’s the Realtors’ Lawrence Yun’s take.
“The wide range of market performance and reversals around the country, ranging from double-digit gains to double-digit losses in both sales and prices, underscores just how local real estate truly is,” Yun said. “The wide changes and mix of numbers also indicates a market in transition, hopefully to one that is becoming more balanced and stable.”
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.