(The author is a Reuters columnist and the opinions expressed
are his own. For more from John Wasik see link.reuters.com/syk97s)
By John Wasik
CHICAGO, July 2 If you're weary of watching the
stock and bond market get dyspepsia over the Federal Reserve's
possible pullback of its easy money policy, turn your gaze to
the U.S. home market. Rising interest rates could be a catalyst
to boost sales and prices.
In January, the average 30-year mortgage rate, as tracked by
Freddie Mac, was 3.34 percent. In the most recent survey, the
rate jumped to 4.46 percent, up more than half a percentage
point from the week before.
While that is still a bargain by historical standards - the
benchmark rate averaged about 8 percent in 2000 - the summer
buying season combined with the possible end of the Fed's easing
policy will move millions of buyers into the home market.
Those who are still on the fence about buying a home will be
worrying that rates will soar higher. Mortgage rates are still
relatively low, so "fear of regret" will push them into
Overall, the outlook for U.S. housing continues to improve.
U.S. home prices posted the biggest gain in seven years in
April, according to CoreLogic, up 12 percent from April a year
Prices also climbed 12 percent year-over-year for the 20
major cities tracked by the S&P Case-Shiller Home Price Indices
during that month. Pending home sales hit a six-year high in
May, according to the National Association of Realtors, the real
estate trade association.
Tight supply and pent-up demand have nudged buyers into the
market. Higher mortgage rates, which have shot up over the past
month, are also motivating buyers to make bids and close sales.
Even more potential buyers may come off the fence: At the
current pace of economic and job growth, mortgage rates could
hit 6 percent next year, which could spark even more sales,
according to Richard Barrington of moneyrates.com.
Not every housing market will experience this upswing,
though. Prices may not have bottomed out in some areas.
BEST MARKETS FOR APPRECIATION
Ideally, the sweet spot for home gains is in a market with
robust job growth, healthy inventories and low foreclosure
rates. Here are some of the leading markets in that category,
according to Local Market Monitor, a real estate information
San Antonio, Dallas, Houston and Austin, Texas - Population
growth in Texas is more than double the national average, thanks
to ample job growth, climate and the energy-industry boom.
Houston, San Antonio, Austin and Dallas-Fort Worth all ranked
among the country's 10 fastest-growing cities, according to the
Homes in the Austin area, for example, have seen nearly 10
percent appreciation in the last three years and 4 percent in
the last year, according to Local Market Monitor. The city has
experienced almost 10 percent population growth in the last
three years. Like many Texas markets, Austin wasn't impacted by
the bubble and has low unemployment, of 5 percent.
Provo, Utah - Provo's healthy economy is fueling job growth,
which has risen 5 percent in the past year; the unemployment
rate is 4 percent. That's translated into strong home price
increases: The median home sales price for the area has climbed
from about $167,000 last year to $185,000 during the past year
through July 1, according to Movato.com, a property information
Fayetteville, Arkansas - Benefiting from the nearby
headquarters of Wal-Mart (WMT.N), job and population growth are
strong. The short-term outlook is good as metro-area
unemployment has trended well below national averages in recent
years. The jobless rate was 5.4 percent in April, compared to
7.2 percent for the state, according to the Bureau of Labor
Several markets are still struggling with high foreclosure
rates, which depress prices. They are generally "older
manufacturing towns with stagnant or shrinking population and
continuing job losses," according to Ingo Winzer, president of
Local Market Monitor. "Not surprisingly, home prices in these
markets continue to fall." Some noteworthy laggards include:
Providence, Rhode Island - Providence is suffering from no
growth, no new jobs and an unemployment rate of 10 percent. As a
result, both sales and average listing prices have dropped over
the past year, reports Trulia.com, an online real estate
service. The number of sales dropped nearly 20 percent year over
year through June 19.
Cleveland, Ohio, and Buffalo, New York - Decreasing
populations and job losses in these rust-belt cities have hurt
housing. These cities experienced several decades of plant
closings, and lingering foreclosures hurt prices across the
board. Buffalo's median sales price, for example, has dropped
from around $80,000 a year ago, to about $63,000, according to
Augusta, Georgia - Population is growing, but jobs are just
barely being added. Georgia was a center of subprime lending,
and more foreclosures are in store. Even though the number of
sales has climbed almost 30 percent, the median sales price is
down more than 6 percent through June 19, according to Trulia.
While you may find some relative bargains in areas hardest
hit by the housing crash, don't forget that employment and the
general economy still play a major role. The housing rebound
won't be sustainable if the U.S. lurches into another downturn,
which is possible if the Fed's future moves trigger a slowdown.
(Editing by Lauren Young and Leslie Adler)
((Follow us @ReutersMoney or at: here))
Keywords: COLUMN WASIK/MORTGAGERATES
(C) Reuters 2012. All rights reserved. Republication or redistribution of
Reuters content, including by caching, framing, or similar means, is
expressly prohibited without the prior written consent of Reuters. Reuters
and the Reuters sphere logo are registered trademarks and trademarks of
the Reuters group of companies around the world.