In the past several months, the housing market has taken massive steps forward, and now appears poised to continue its growth unabated at least through the end of the year, and perhaps beyond. Now, new data show the reasons for this recovery are deeply interconnected.
There are a number of factors at play in the massive housing recovery, which has seen single-family housing starts rise some 46.9 percent nationally between the ends of 2011 and 2012, according to a new report from the industry tracking group Metrostudy. Some markets – including Las Vegas; Naples/Fort Myers, Fla,; and Atlanta – have even seen year-over-year improvements in excess of 90 percent.
A number of other metropolitan areas saw other high increases in single-family housing starts as well, the report said. For example, the Twin Cities and Denver saw jumps of 75 and 74.4 percent, respectively, while Raleigh-Durham and Nashville’s gains were 68.3 and 67.1 percent, respectively. Northern California, Chicago, Austin and Phoenix all saw gains of between 61.3 and 64.9 percent, rounding out the top 11.
It’s difficult to say that any one factor led to the improvement more than any others, but perhaps it all starts with low home prices, the report said. Prices collapsed significantly during the recent housing crisis and as interest rates fell as well, that likely encouraged many potential buyers who had been outside the market for some time to become more interested in buying a home as the economy continued to improve and consumer confidence rose. That increased competition among buyers for homes already on the market, and also led to more construction of new properties, all of which drove up prices.
The increased competition and higher prices in turn brought many homeowners who had previously been underwater on their home loans back into positive equity, which was important because many Americans felt stuck in homes on which they owed more than the property was worth, the report said. Once they were back above water, many could begin considering listing their homes for sale again, and have consequently risen to meet higher demand among buyers.
Experts generally agree that the housing recovery should last at least through the end of the year, if not longer, thanks to improving economic factors and still-high affordability, though growth is expected to remain at current levels, rather than continue improving.