Similar to last year, 2013 is proving to be a year of progress and recovery.
Currently, the housing market is showing improvement with the rise of home prices. Back in May, new home sales had hit a five-year high!
In April, the S&P/Case-Shiller home price index was up 12.1%, compared to a year ago, making it in the top 20 real estate markets across the nation. That was the biggest annual jump in prices in seven years! Prices had climbed 2.5% from March, posting the biggest one-month rise in the 12-year history of the index.
According to a government report, new homes sold at an annual pace of 476,000 in May, which is the best reading since 2008. New home prices also showed a 10.3% increase from a year earlier. From April, the pace of sales was up 2.1% and up 29% from a year ago.
With a drop in foreclosures, along with a tight supply of homes for sale, compounded by mortgage rates that hit record lows, housing has been dramatically improving over the last 11 months.
Yet the 30-year mortgage rate has risen to nearly 4%, up from 3.35% at the start of May. Although it is still low by historical standards, it has trimmed about $12,000 off of an average buyer's purchasing power. After April’s sharp jump in home prices, mortgage rates began to climb in May.
Stan Humphries, chief economist of home price tracker Zillow shares that “Home value appreciation in some of these areas will have to slow down, or potentially fall, as higher prices are no longer masked by rock-bottom mortgage rates."
The National Association of Realtors has chimed in, adding that the growth of home prices is happening too fast which can result in derailing the recovery of housing.
"In general, the national housing recovery is strong and sustainable, but pockets of volatility will emerge. Buyers expecting home values to continue rising at this pace indefinitely may be in for a shock,” said Humphries.
Still, higher costs for homebuyers shouldn’t derail the recent recovery, "Affordability remains near historic highs, despite the recent rise in rates and home prices. And while banks might be charging higher rates, they are likely to ease lending standards for mortgages due to the stronger prices. That should make it easier for some buyers to qualify for home loans,” according to Joseph LaVorngna, chief U.S. economist at Deutsche Bank.