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January’s gain was the sharpest since 2006, thanks to tight inventory and low mortgage rates. Is another bubble building?
But those gains are coming off the steep declines homeowners suffered in the late 2000s. Zillow, which tracks property values, notes that while most markets have already hit the bottom, some areas are still likely see price declines.
Prices are getting a boost not just from shrinking inventory but also low mortgage rates, which help lure people into considering a home purchase. The benchmark 30-year fixed-rate home loan is still under 4%, compared with 4.16% a year ago, according to Bankrate.com.
With some buyers worried that the low rates might be ending, it’s spurring them to consider buying or refinancing.
“A lot of people are saying ‘This may be my last chance,’ especially people who tried to refinance in the past — say, a year ago — but couldn’t do it then,” WCS Funding mortgage banker Michael Becker told Bankrate.com.
By a margin of more than 3 to 1, Americans expect the housing market to continue improving over the next 12 months, according to a Bloomberg National Poll.
So, which were the best-performing cities tracked by Zillow? Homes in Phoenix appreciated the most, jumping almost 22% from a year ago. The Arizona city was also one of the worst hit when housing prices collapsed a few years ago.
Other cities enjoying big price jumps are San Francisco (17.2%), San Jose (16.8%) and Las Vegas (16.2%), which was also slammed during the housing bust.
Only two cities tracked by Zillow saw declines on a month-to-month basis: St. Louis and Orlando.
Nevertheless, not everyone is convinced the housing price gains are a good thing. David Stockman, the former director of the Office of Management and Budget during the Reagan administration, told Yahoo’s Daily Ticker that he believes we’re in another bubble.
“We don’t have a real organic sustainable recovery,” Stockman said, “because in a world of medicated money by the central bank, things aren’t what they appear to be.”
By Aimee Picchi Feb 22, 2013