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According to CNBC’s Diana Olick, one of the problems is that the rate at which home prices are rising is far outpacing what has always been considered normal. Historically, home prices have always increased at a rate of about 3% to 4% a year in a ‘normal’ economy, but some markets have seen increases that far outpace this ‘healthy’ level of growth – for example, Phoenix, Arizona, where prices have shot up 26% year-on-year.

What’s causing these price hikes? Experts suggest that lower inventories are one of the main driving forces, with lack of availability forcing prices up as buyers try to outbid each other for those ‘plum’ properties that remain. According to Olick, inventories are now at their lowest level since May 2005, citing data from the National Association of Realtors.

Lawrence Yun, NAR chief economist, states that this is indeed his greatest concern right now:

“Even if we see an increase in the spring and summer, if home sales hold at the [current] level or even a 5- to 6-month supply, price increases are guaranteed. We don’t want to see rapid appreciation in prices faster than income,” stressed Yun.

The main worry is that, historically at least, healthy gains in the housing market have always been driven by rising levels of income and employment, as opposed to a lack of supply. In effect, the gains we are seeing now could well be unsustainable.

Also concerning is the impact that investors are having on markets, writes Olick. Some of the worst hit markets during the recession, such as Las Vegas, California, Florida and Phoenix, have been seized upon by investors looking to make long term profits by turning foreclosed homes into rentals. However, the danger is that as prices rise, some investors may look to cash in on their properties instead – but will there be enough non-investor buyers to support them?

According to NAR’s Pending Home Sales Index, pending home sales have now posted annual increases for the last 19 months consecutively. Lawrence Yun (left) , NAR’s Chief Economist, offered this comment via the release:

“Even with market frictions related to the mortgage process, home contract activity continues to improve. Home sales are recovering now based solely on fundamental demand and favorable affordability conditions.”

Furthermore, the NAR projects that existing-home sales will rise between 8 to 9 percent for 2013.

The Pending Home Sales Index is based on a huge national sample, which represents about one fifth of all transactions for existing home sales. Existing-home sales for December are to be announced January 28; release times are 10:00 a.m. EST.

The video below from NAR offers more details.

The number of homes sold in October 2012 — 4.79 million — went up 10.9 percent over the October 2011 number of 4.32 million. Foreclosures and short sales made up about 24 percent of the October sales.

Lawrence Yun , NAR chief economist, said there was some impact from Hurricane Sandy. “Home sales continue to trend up and most October transactions were completed by the time the storm hit, but the growing demand with limited inventory is pressuring home prices in much of the country,” he said. “We expect an impact on Northeastern home sales in the coming months from a pause and delays in storm-impacted regions.”

The number of houses on the market fell to 2.14 million existing homes, the lowest number since February 2006.

Meanwhile, mortgage rates continue at low levels, too. Freddie Mac says the 30-year conventional fixed-rate mortgage hit a new low at 3.38 percent in October. In October 2011, the rate was 4.07.

NAR President Gary Thomas, broker-owner of Evergreen Realty in Villa Park, Calif., said record low mortgage interest rates shouldn’t be taken for granted. “Even with rising home prices, we’ll continue to see favorable housing affordability conditions over the coming year, but they won’t last forever,” he said.

“Inflationary pressures are expected to build during the next two years. As a result, mortgage interest rates will also rise with inflation. Buyers who are currently held back by tight mortgage credit standards should work to improve their credit scores so they’ll be able to qualify for a mortgage while conditions are still favorable.”

Although the overall market is improving, things aren’t boding as well for first-time buyers, who are making up less of the housing market. They normal comprise about 40 percent of the market but today the percentage has slipped to 31 percent of buyers, according to NAR data.

“Financing of first-time home buyers with low down payments threatens to become a significant problem in the U.S. housing market,” Thomas Popik, research director for Campbell Surveys, recently wrote.

“Fifty percent of first-time home buyers use FHA financing, but FHA insurance premiums are increasing and underwriting is becoming more strict.”

Main image: © W.Scott – Fotolia.com

Research unveiled at an industry conference last week also found the amount of time it takes to sell a house is shrinking.

“We’ve seen a tremendous increase in cash buyers since the housing downturn that we haven’t seen before in history,” said Lawrence Yun, chief economist of the National Association of Realtors®. Yun said a decade ago all-cash home purchases were less than 10 percent of the market but have increased steadily since 2008, to as much as 30 percent of sales.

Tight lending conditions have contributed to the cash phenomenon. Most of the all-cash buyers are investors, Yun said. There is also an increase in the number of international buyers. NAR research shows that 62 percent of international purchases were all cash; the percentage has continually increased since 2007.

Another segment of homebuyers that is using all cash is boomers who are downsizing. They sometimes have enough equity in the home they sell to pay all cash for a smaller home.

Cash sales often mean quick sales.

“Research shows a bias toward cash sales for newer and lower priced homes,” Dr. Grant Ian Thrall, president of the American Real Estate Society , said. “Many of those sales are occurring within the first 60 days that the home is on the market, and more than half sold within the first 120 days.”

Meanwhile Yun says the decrease in the amount of time on the market is also the result of a tightened inventory.

“Tightened inventories in some places mean homes are selling more quickly and reducing time-on-market,” Yun said. “Our research shows that last year, home buyers saw 10 homes before buying, down from 12 the year before, and more than half of buyers reported that finding the right home was the hardest part of the home search process.”

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The total sales of single-family homes, townhouses, and condominiums decreased by 1.7 percent to 4.75 million in September from 4.83 million in August. The increase from September 2011 to September this year was 11 percent. Foreclosures and short sales accounted for 24 percent of the sales in September.

“Despite occasional month-to-month setbacks, we’re experiencing a genuine recovery,” said Lawrence Yun, NAR chief economist. “More people are attempting to buy homes than are able to qualify for mortgages, and recent price increases are not deterring buyer interest. Rather, inventory shortages are limiting sales, notably in parts of the West.”

The total number of houses available for sale fell 3.3 percent from August to September and is 20 percent lower than September 2011.

“The shrinkage in housing supply is supporting ongoing price growth, a pattern that could accelerate unless home builders robustly ramp up production,” Yun said.

Industry representatives predict 2013 to bring a recovery in the housing market.

“Now that the summer buying season is behind us, we can clearly see that the market made a significant rebound, and 2012 is definitely the year of the housing recovery,” said Margaret Kelly, CEO of RE/MAX, LLC.  “Although we still face some serious obstacles in tight lending and shrinking inventory, we believe that the housing market will continue to recover into 2013.”

The inventory of pre-owned homes on the market in North Texas has dropped almost 40 percent in the last two years, according to The Dallas Morning News. In some of those areas, the supply is at the lowest level in more than a decade.

Meanwhile, in the Portland area the number of homes on the market has gone down 26 percent over the past year, according to The Oregonian.

“You don’t get to call your folks or think on it overnight,” said Nick Krautter of Keller Williams Realty, told The Oregonian. “You have to move now. There’s definitely a sense of urgency that’s back in the market.”

Image by Art Rock (Hennie)/flickr.com

ERA Real Estate has been around for 40 years, developing consumer-oriented products and services in the real estate industry.  The ERA network includes some 30,000 brokers and sales associates and approximately 2,400 offices throughout the United States and 35 countries and territories.

“As vacations wind down after Labor Day and people become more focused, the desire to be in a new home for the holidays is a historically strong driver of fall home sales,” said Charlie Young, president and CEO of ERA Real Estate.

The ERA survey reveals 40 percent of respondents like fall for homebuying because of the “back to school” and starting fresh mentality that hits when September and October come around. Twenty percent cite wanting to be in their new home in time for the holidays. And 10 percent want to take advantage of the tax benefit of buying and owning a home.

The biggest group of fall homebuyers are first-time homebuyers at 27 percent, according to the report. Twenty percent are move-up buyers. Some 17 percent are retirees or those downsizing. The remaining 36 percent is made up of investors, military relocations, vacation home buyers, and “other.”

Fall is also a good time from a buyer standpoint as many sellers want to try to sell by the end of the year. Also, sellers in colder climates generally want to sell before the cold weather and snow hit.

How the findings will affect what happens this fall remains to be seen.

The National Association of Realtors reports pending home sales in August 2012 declined after reaching a two-year peak. But the August figures are higher than August 2011.

Lawrence Yun , NAR chief economist, said some volatility can be expected in the monthly readings. “The performance in month-to-month contract signings has been uneven with ongoing shortages of lower priced inventory in much of the country, and across most price ranges in the West, but activity has remained at notably higher levels this year,” Yun said.

Michele Dawson is a freelance writer based in Phoenix, Arizona. She spent seven years as a newspaper reporter and has written for various magazines and web sites specializing in real estate and home improvement, including Realty Times, SmartHomeowner, California Builder, and the Sacramento Business Journal.

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Existing home sales rose 7.8 percent to a seasonally adjusted annual rate of 4.82 million in August from 4.47 million in July. Comparing year to year, August sales this year were 9.3 percent higher than August 2011.

Lawrence Yun, NAR chief economist, said favorable buying conditions get the credit. “The housing market is steadily recovering with consistent increases in both home sales and median prices. More buyers are taking advantage of excellent housing affordability conditions,” he said. “Inventories in many parts of the country are broadly balanced, favoring neither sellers nor buyers. However, the West and Florida markets are experiencing inventory shortages, which are placing pressure on prices.”

The national median existing-home price for all types of housing rose 9.5 percent to $187,400 from August 2011 to August 2012. The August increase was the strongest since January 2006 when the median price rose 10.2 percent from a year earlier.

Meanwhile, the NAHB reports that builder confidence in the market for new homes rose for the fifth month in a row. In September the level rose to 40, marking the index’s highest rating since June 2006.

“This fifth consecutive month of improvement in builder confidence provides further assurance that the housing market is moving in a positive direction, but there’s still a long way to go on the road to recovery and several obstacles are slowing our progress,” said NAHB Chairman Barry Rutenberg, a home builder from Gainesville, Fla. “In particular, unnecessarily tight credit conditions are preventing many builders from putting crews back to work – which would create needed jobs — and discouraging consumers from pursuing a new-home purchase.”

The survey, the NAHB/Wells Fargo Housing Market Index, conducted for the past 25 years, gauges builder perception of home sales and sales expectations for the upcoming six months. Any number over 50 indicates that more builders view sales conditions as good than poor.

And more good news for buyers: the average 30-year fixed rate mortgage dropped to 3.49 percent with a .6 point this week, according to Freddie Mac. The average 15-year fixed rate mortgage came in at 2.77 percent with a .6 point.

Michele Dawson is a freelance writer based in Phoenix, Arizona. She spent seven years as a newspaper reporter and has written for various magazines and web sites specializing in real estate and home improvement, including Realty Times, SmartHomeowner, California Builder, and the Sacramento Business Journal.

Encouraging news for US real estate © CaptainScott – Fotolia.com

First, the national median price of existing homes rose in July with five back-to-back months of year-over-year increases. The number of existing single-family homes, townhouses, condos, and co-ops grew 2.3 percent from 4.37 million in June to 4.47 million in July. When comparing this July to last July, the increase is 10.4 percent.

“Mortgage interest rates have been at record lows this year while rents have been rising at faster rates, said Lawrence Yun, NAR chief economist.  “Combined, these factors are helping to unleash a pent-up demand,” he said.  “However, the market is constrained by unnecessarily tight lending standards and shrinking inventory supplies, so housing could easily be much stronger without these abnormal frictions.”

Equally encouraging is the fact that houses are selling more quickly. In July 2011, the median time for a U.S. house to sit on the market was 98 days. For July this year, it’s about a month less at 69 days.

“Our current forecast is for the median existing home price to rise 4.5 to 5 percent this year and about 5 percent in 2013, which is somewhat stronger than historic norms because of the inventory shortfall that is most pronounced in the low price ranges,” Yun said.

Reports are also strong from the hardest-hit states like California, Nevada, Arizona and Florida, where home values took severe nosedives over the past five years.

For example, the California Association of Realtors reports the statewide median price of a single-family home in July 2012 shot up 12.7 percent over July 2011.

“The strong performance in the median price over the past few months reflects a sales shift away from homes in the lower price ranges of the market due to stark inventory toward sales of homes priced above $500,000,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young. “As an example, in July, sales of homes priced below $200,000 declined 9.4 percent from the previous year, and homes priced above $500,000 climbed 27.7 percent from a year ago.”

The Home Depot corroborates the upswing. Sales at the country’s largest home-improvement retailer jumped 12 percent in the second quarter of 2012 (April, May and June). Sales of paint, bathroom accessories and kitchen installations contributed to the boost.

Michele Dawson is a freelance writer based in Phoenix, Arizona. She spent seven years as a newspaper reporter and has written for various magazines and web sites specializing in real estate and home improvement, including Realty Times, SmartHomeowner, California Builder, and the Sacramento Business Journal.

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The rally, which took place by the Washington Monument on National Mall in the capital, saw numerous speakers repeat those sentiments as they took turns to address the crowd, reported Realtor Mag.

Leading the cheers was Lawrence Yun, the NAR’s chief economist, who stressed that mortgage interest deductions belong to the American people, rather than politicians looking to boost their tax revenues.

Steny Hoyer,  U.S. Representative for Maryland’s 5th congressional district and a Democrat, also took to the stage, taking the opportunity to urge Congress to listen to the opinions of realtors when it comes to crafting the country’s policies on real estate.

“God bless all of you, America is better for what you do,” Hoyer told the cheering crowds.

Hagan Stone, RPAC fundraising chair for Tennessee and a realtor in Brentwood, Tenn., told Realtor Mag that the government needed to ensure real estate was at the forefront of their economic policies. Moreover, the government should pull out all the stops to avoid harming the housing industry any further.

“I’ve never seen anything like this,” said Stone. “This makes me incredibly proud to be part of the National Association of REALTORS®.”

Chris Polychron, a realtor from Hot Springs, Arkansas, and nominee for the NAR’s 2013 First Vice President, echoed those sentiments, saying “I’ve never been more proud. We’re not here for ourselves, we’re here for the American homeowner.”

Dreaming of a better spring... How will home sales fare this year? © Pavel Losevsky - Fotolia.com

There are a number of signs pointing to a positive spring in 2012: housing affordability is at a record high level, mortgage rates are super-low, inventories are in decline, and finally, the unemployment situation seems to be improving at long last.

Further, we have already seen existing home sales slowly edge up in the past few months, which in turn has led to a decline in for-sale housing inventories. At the last count in December 2011, there were almost 2.4 million units for sale, the lowest figure since 2005 when all of our problems first began.

Even more encouraging is information being received from the National Association of Realtors, whose chief economist Lawrence Yun told the Investor’s Business Daily that home prices in many markets are now stabilizing. In addition, the NAR’s Housing Affordability Index has reached its highest point in more than 30 years, since the 1970s, something that indicates housing to be highly affordable for the average family these days.

For their part, the National Association of Home Builders are also optimistic, predicting an 18% increase in the number of new home sales, following their worst ever year in 2011.

But despite all of these signs, a successful spring showing is by no means guaranteed. The big problem for many remains the strict mortgage lending guidelines that have left many potential buyers in no position to secure credit. Foreclosures too, will continue to be a problem, putting downward pressure on house prices in many areas.

More likely, we are going to see a slight improvement this spring, says Celia Chen of Moody’s Analytics:

“The signals are a little hard to extrapolate, but ultimately by the end of this year we should see the housing market on more solid footing, so we’ll see an improvement but off of very, very weak activity.”