Where are Housing Prices Going?

There has been strong growth in housing sales during our 7-year recovery from the Great Recession in 2007-2008. Just before the recession new and existing home sales were at more than 8.5 million a year, but then about 10 million homeowners lost their homes through foreclosure. Without a doubt, the real estate market is cyclical, and today we are hearing many “armchair” analysts exhorting that we are approaching “a new housing market bubble.”

Lawrence Yun, the chief economist of the National Association of Realtors, recently addressed this analysis and stated “Year-to-date homes sales are up 6.3 percent and prices in May were 7.9 percent higher that a yar earlier. The trends are expected to stay positive and are likely to boost business dollar volume by as much as 15 percent in 2015. These statistics don’t even inclue new-home construction, which is growing at a strong clip as well.”

Yun comments that the differences in the 2007-2008 market from todays is dramatic with credit being much tighter today, and we are seeing an unusually high number of all-cash sales. Yet sales of existing homes and new construction are well below the pre-bubble era. He says “home sales (this year) are barely over 5 million and new-home construction is barely scratching 1 million units.” And significantly home mortgages balances have fallen sharply from where they were 10 years ago, with more homeowners making their mortgage payments on a timely basis and fewer homeowners looking to raise cash by “cash-out” refinances.

Yun expects home prices to increase as long as mortgage interest rates stay below 6 percent. Yun says “Should mortgage rates cross the 6 percent mark, maybe two years down the road, then either home prices will be flat or other forces will be evident.” He’s alluding to the fact that home prices would continue to rise if the economy continue to grow, with increases in new job creation, and increases in income levels. Yun does not foresee any impending downturn in home values.

John Hamilton, a Certified Negotiation Expert, with a BA Degree in Economics from Drury University in Missouri, and MBA studies at the University of Utah, has been a Utah real estate agent for the past 46 years and a broker since 1972. His company, MediaOne Real Estate, is Utah's largest publisher, and seeks to provide Buyers a strategic advantage and Sellers the maximum exposure in today's formidable market.