In 2012, we witnessed several signs of recovery in the U.S. housing market. Inventory levels have dropped. Prices have stabilized in some cities, while rising in others. Demand has picked up.
Even the nation’s unemployment rate, which shot up to 10% during the recession, has improved over the last 12 months (from 8.3% to 7.8%).
And now we have more evidence of an ongoing recovery within the housing sector. This time, it comes from Trulia, the real estate data and listings website.
Asking Prices Have Risen in 82 of the 100 Largest Metros
A recent report by Trulia showed that real estate asking prices rose in 82 of the 100 largest U.S. metro areas in 2012. In 2011, asking prices rose in only 12 out of 100 metros.
The market is changing. Gone are the days of desperate sellers accepting the first low-ball offer to come along. Today, home sellers are feeling more confident about their position in the marketplace — and the value of their homes.
It’s a supply and demand thing. In the years following the housing collapse, local housing markets suffered from a glut of homes for sale. Many of these homes were ‘distressed’ properties in some state of foreclosures. Having a large surplus is bad enough for home prices. Having a surplus of distressed homes is a double whammy, as these homes are often sold below market value.
In 2012, we saw improvements in both of these areas. Inventories have declined in most cities, and the national foreclosure rate has slowed. Data from Realtor.com shows that for-sale inventory declined in 141 of 146 U.S. metro areas, over the last year or so. In November, foreclosure starts fell to their lowest point in six years, according to RealtyTrac. Both of these trends are helping to boost home prices across the country.
Trulia: Biggest Turnarounds Seen in the West
It’s hard to talk about the housing market in singular terms. So far, the housing recovery has happened at the city and state level. Some cities, like Phoenix, have been rebounding for many months. Others are just now turning the corner. Additionally, the recovery has been more pronounced in some markets than others.
Trulia recently ranked the five cities below as the “Top Turnaround Markets” for asking price increases. All five of these cities had price gains of more than 10% in 2012, following declines of more than 10% in 2011. The number in parentheses is the year-over-year change in asking price, from Dec 2011 to Dec 2012. The green numbers represent the difference between Dec 2012 and Dec 2011 price changes (i.e., turnaround).
- Las Vegas, NV (+16.3% in 2012) +27.5% Turnaround
- Seattle, WA (+10.2% in 2012) +24.0% Turnaround
- Phoenix, AZ (+26.0% in 2012) +21.8% Turnaround
- Oakland, CA (+12.7% in 2012) +21.0% Turnaround
- San Jose, CA (+16.1% in 2012) +20.8% Turnaround
Home prices are expected to continue rising in 2013, though local markets will vary a great deal. Some U.S. cities will likely see double-digit growth in 2013, while others will experience only modest gains.
Realtor.com: California Tops List for 2012
Realtor.com tracks real estate data in 146 U.S. metro areas. The median list price is one of their areas of observation. In this context, ‘median’ means that half of the active listings have a higher list price, while half have a lower price. When viewed over a period of months, this metric helps us understand which way a market is headed.
Here are the five cities where the median list price rose the most, from October 2011 to October 2012:
- Sacramento, CA (+31.01%)
- Santa Barbara – Santa Maria – Lompoc, CA (+27.03%)
- Phoenix – Mesa, AZ (+25.57%)
- San Jose, CA (+20.49%)
- Oakland, CA (+17.49%)
This list was based on the most recent data available at the time of publication.
Asking Price vs. Selling Price vs. Market Value
It’s important for home buyers to understand the difference between asking price, market value and selling price. In theory, all three of these numbers should be close in value. But that is rarely the case. There is usually some degree of difference between the three values. Sometimes, the difference can be significant.
Consider the following example. A homeowner lists her home for sale at $265,000. This is the asking or ‘list’ price. Comparable homes have sold for around $215,000 in recent months. So $215,000 could be considered the market value for the newly listed home. After all, it’s the market that determines what a property is worth — not the homeowner.
After a period of negotiation, the seller finally agrees to sell the house for $218,000. This becomes the final sale price, or selling price.
This may seem like an unrealistic scenario. Who would list their house $50,000 above comparable sales? My neighbor did, actually. This is a real-world scenario using actual list and sale prices. And it’s a very common scenario in today’s real estate market. Many homeowners fail to realize (or accept) how much value they lost during the housing crisis.
So buyer beware. Better yet … buyer be educated.