If you’ve read the business section of your local newspaper lately, you’ve probably heard that home prices are rising in the U.S. And it’s true. Home values are now climbing in most major cities. According to the latest release of the Case-Shiller Home Price Index, U.S. house prices rose 8% in January, compared to a year earlier.
As far as asking prices go, the biggest gains have occurred in California and across the southwestern United States. In fact, California cities currently hold nine of the top ten spots for asking-price increases.
Asking Prices Are Soaring in These Housing Markets
Once a month, Realtor.com publishes a real estate report with housing data for 146 of the largest metro areas in the U.S. Among other things, they track changes in median list prices (a.k.a., asking prices) from month to month, as well as annually.
Here are the ten metro areas where asking prices rose the most over the last year.
- Sacramento, CA +40%
- Santa Barbara, CA +38%
- Oakland, CA +31%
- San Jose, CA +29%
- San Francisco, CA +26%
- Phoenix, AZ +25%
- Fresno, CA +22%
- Ventura, CA +20%
- Orange County, CA +19%
- Riverside–San Bernardino, CA +18%
Details: These numbers show the annual change in median list prices based on data provided by Realtor.com. The percentages above indicate price changes from February 2012 to February 2013. All numbers have been rounded to the nearest percent.
The Inventory Factor
Nine of these cities have something else in common. They have all experienced a major decline in the number of homes for sale. Inventory is shrinking fast in most of these housing markets.
Consider Sacramento, where the number of real estate listings has dropped by a whopping 67% over the last year or so. Inventory in Oakland declined by 61% during the same 12-month period.
Phoenix, Arizona is the one exception. Housing inventory in Phoenix is actually leveling off, after a period of sharp decline. But the other nine cities on this list (the California cities) have all experienced inventory declines greater than 30%.
Honorable mention: If we built this list out a bit more, we would break the California streak. Other U.S. cities with significant gains in asking prices include Atlanta; Seattle; Detroit; Boise City; Washington, D.C.; and Las Vegas. All of these housing markets had asking-price gains of 14% or more, over the last year.
Additional Gains Expected In 2013
Asking prices will likely continue to rise in all ten of these housing markets, through the end of 2013 and beyond. It’s Supply and Demand 101. Housing demand is rising due to economic stabilization, but there is not enough supply to meet it.
New construction has picked up since the housing market crashed. In fact, major residential projects are underway in nearly every city listed above. But it will be some time before the combined inventory of new and resale homes meets the current level of demand.
As a result of these and other factors, we expect to see a continued rise in asking prices for many cities across the country, especially those in California and the southwestern United States.
Disclaimer: This story contains projections of home prices in the United States. These statements represent the opinion of the author and should not be viewed as fact. We make no guarantees or assertions about future conditions in the housing market.