Where Home Prices Are Suddenly Hot

Posted by: Chris Palmeri on November 10, 2009

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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.”

Reader Comments

Cathy

November 10, 2009 11:51 PM

we all feel recession chills, that's why we have to think of a good cost-effective way to survive...

-Chat Line

Hugo van Randwyck

November 11, 2009 4:24 AM

When people buy foreclosed homes at low prices, that means they will have lower monthly mortgage payments, so have more money to buy other goods and services - so creating jobs, and the recovery.

Robert Laughing

November 11, 2009 12:42 PM

ALWAYS a few 'freaky' examples, but then, prices are so low, and unemployment is about to max out by mid-summer, some folks are wisely beginning to bite. Personally, I'd likely wait till Nov-Dec of 2010...just in case we have a significant 'Double Dip' Recession. Look at ANY graph chart, and ON THE WAY DOWN, one finds the uptick, before the drain, takes it ALL AWAY. Remember, Mr Yun is PAID to huckster property. He's right about it being VERY local; for those in coastal states, $8k is a ROUNDING error.

Doug

November 11, 2009 4:35 PM

Mortgage rates aren't going to go any lower. Now is the time to buy, except in a few areas of the country where housing is still weak.

Marianne Paskowski

November 11, 2009 5:52 PM

Nothing has changed to break this vicious cycle. If potential buyers can buy homes at short sales, where sellers are under water, and the banks own their homes, the next step for those folks is foreclosure. Buyers can get these properties with only 3 percent down. Is this good, or leading to the next wave of bad stuff?

Scott Dailey

November 18, 2009 5:03 PM

I am a builder at the Delaware beaches. Delaware is a prime beach home and retirement area. We have seen a noticeable increase in traffic and buyer quality. I contend that there is no real "nation" real estate market, and that nationwide statistics are somewhere south of useful.
http://www.capstone-homes.com/capstone-homes_blog/?p=486

David Corporaal

November 22, 2009 2:19 AM

I am encouraged to see this trend in my area of Arizona. It is definately the time to buy. The banks need to seek out people with good credit and encourage loans for property, instead of making it so difficult. Banks need to pinpoint people with good credit and be willing to work with them instead of giving loans to those who cannot afford homes.

James

November 23, 2009 3:16 PM

We've seen similar regional variations here in the UK - some towns (mainly in the more prosperous south) have seen very little variation in house prices - reflecting a more stable economic base, less unemployment and more general optimism in these areas.

On top of this there are diverging trends in the market dependant on value - high end London properties are rising in value again buoyed by the prospect of city bonuses and the influx of foreign investment attracted by the weak pound.

more uk property news and views at www.thebigpropertylist.com

amram ezerzer

December 28, 2009 11:02 AM

the real estate market in montreal is booming and will keep rising because interest rates are at there lowest levels ever, BUY IN MONTREAL AND INVEST WITH US

qreq from Ca.

February 24, 2010 7:40 PM

I have seen what over building and over buying has done to the certain parts of N. Cal. It is not famalies buying up the REOs but people with cash to make more cash. The ordinary citizen pool dried up when the banks let anyone who was breathing buy a house that was way over priced, and was a time bomb ticking away. Those who made money off all these obscene deals are now swooping in like buzzards, enjoying the spoils of their manipulating and unethical ways

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About

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.

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