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Red Hot Housing

Melissa Leong
The National Post
March 16, 2013

Slumbering U.S. housing giant has awakened.

The note to investors was entitled: “Someone say house party?”

Strategists at the Bank of America assessed the U.S. real estate market and have bravely announced that the “positive feedback loop has begun.”

U.S. home prices would likely increase 8% this year, up from a previous estimate of a 4.7% increase, they predicted. JPMorgan Chase & Co. more than doubled its forecast for U.S. home price gains in 2013 to 7% this week, and sees a more than 14% increase through 2015.

After almost six years of crashing, burning, and stagnating, the U.S. housing market is finally shooting higher. Coincidentally, this steady warming trend is occurring as the Canadian housing prices are cooling and, according to a recent TD Bank report, are set to be all-but-frozen for the next decade.

“They’re gathering momentum,” said Paul Diggle, property economist at Capital Economics, who suggested U.S. house prices will rise 8% in 2013 and 4% thereafter. “We think the rebound in the [U.S. housing] market is sustainable.”

Home prices began rising last year as unemployment declined, mortgage rates fell to record lows and a shrinking pool of listings sparked competition among buyers.

February marked the 32 month inventories have dropped, said a national RE/MAX report and the inventory is 29% lower than this time last year.

Investors, including Canadians, flooded the market and have scooped up homes to live in and to rent out. (In December, 28% of buyers reported using cash to purchase property, according to the National Association of Realtors.) The lack of new construction and homeowners who are holding onto their homes, waiting for better days to sell has all led to an inventory shortage.

In 2010, it would take 9.4 months to burn through the existing inventory in the U.S.; in January, 2013, the months supply figure was 4.2. (A balanced market is six months.)

“Building activity has been coming around. It is still below the historical normal but it is on an upward trend,” said Lawrence Yun, chief economist at the National Association of Realtors. “The only relief can come from new builders. Some say the underwater homeowners, as they become above water with prices rising may help with the inventory. But the logic is not there… They will be the same people who will be buying. They’re not a net supply to the inventory.”

Posted on Monday, April 1, 2013 at 12:56PM by Registered CommenterElaine in | CommentsPost a Comment | References1 Reference

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