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Real Estate Prices Are Going Back Up
Originally published on Bloomberg View on July 8, 2012.
House prices, after falling for more than five years, are rising again. All the major sales-price indexes show that there have been modest national increases in recent months, even after adjusting for seasonal patterns.
When foreclosures and distressed sales are excluded from the data, prices are up even more. And we should expect further gains: The asking-price index, a leading indicator of sales prices, published by Trulia Inc. (where I work), climbed at an annualized rate of 3.3 percent in the second quarter of this year, adjusted for mix and seasonality, and rose in 84 of the 100 largest U.S. metropolitan areas.
Of course, if the U.S. economy falters, due to a deepening of the economic crisis in Europe or a wave of foreclosures, prices may reverse. For now, though, the increases are widespread. For the real-estate market and housing policy, this is cause for relief, but also for some concern.
One immediate effect of the price turnaround is that inventory tightens. In the past year, beginning even before prices rose, the inventory of listed homes shrank 20 percent, due to fewer foreclosures for sale and little new construction. Smaller inventory contributes to price increases; when there are fewer homes available, sellers can ask more. In some local markets, bidding wars have returned. Now, rising prices could even accelerate the decrease in inventory in the short term, as buyers act quickly in hopes of paying as little as possible, and sellers hold off listing their homes in anticipation of further price increases. In fact, 61 percent of people do expect prices in their local market to rise in the next year, according to a recent Trulia survey.
0 commentsRising Home Prices Can’t Keep Up with Rent Increases
Price gains in Denver, San Jose and Pittsburgh look like they’re here to stay, but a big foreclosure backlog put the price jumps in Phoenix, Miami and Detroit at risk.
The Trulia Price Monitor and Trulia Rent Monitor are the earliest leading indicators of how asking prices and rents are trending nationally and locally. They adjust for the changing mix of listed homes and therefore show what’s really happening to asking prices and rents. Because asking prices lead sales prices by approximately two or more months, the Monitors reveal trends before other price indexes do. With that, here’s the scoop on where prices and rents are headed.
Rent Increases Outpace Price Gains In June
Asking prices were up once again month over month in June, by 0.3%. Aside from May, when asking prices increased by so little that they were essentially unchanged, asking prices have moved up every month since February. Now, even the year-over-year price change is positive. Foreclosures hold back price gains; when we exclude foreclosed homes, prices are up 1.7% year-over-year. At the local level, prices have risen quarter-over-quarter in 84 of the 100 largest metros, seasonally adjusted – these widespread gains are in addition to the typical springtime boost. Now that’s real progress.
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June 2012 Trulia Price Monitor Summary |
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| % change in asking prices | # of 100 largest metros with asking-price increases | % change in asking prices, excluding foreclosures | |
| Month-over-month, seasonally adjusted | 0.3% | (not reported) | 0.8% |
| Quarter-over-quarter, seasonally adjusted | 0.8% | 84 | 2.2% |
| Year-over-year | 0.3% | 44 | 1.7% |
Home Prices Stall, Breaking 3-Month Streak of Rising Prices
After three straight months of price increases, the May 2012 Trulia Price Monitor showed no change in asking prices from April. But, at the same time, rent increases keep accelerating.
Each month we publish the Trulia Price Monitor and Trulia Rent Monitor, which are the earliest leading indicators of how asking prices and rents are trending nationally and locally, adjusted for the mix of listed homes and seasonal factors. Here’s the scoop on how prices and rents did in May.
After Three Months of Increases, Asking Prices Flat in May
Asking prices on for-sale homes were unchanged in May month over month, seasonally adjusted. Because prices rose in February, March and April, prices remain 1.6% higher in May than one quarter ago, and most of the country has seen price increases: 86 of the 100 largest metro areas had quarter-over-quarter price increases in May, seasonally adjusted.
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May 2012 Trulia Price Monitor Summary |
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| % change in asking prices | # of 100 largest metros with asking-price increases | % change in asking prices, excluding foreclosures | |
| Month-over-month, seasonally adjusted | 0.0% | (not reported) | 0.4% |
| Quarter-over-quarter, seasonally adjusted | 1.6% | 86 | 2.1% |
| Year-over-year | -0.2% | 41 | 1.0% |
Rising Home Prices: Coming to a Market Near You
The April 2012 Trulia Price Monitor revealed quarter-over-quarter asking price increases in 92 of the 100 largest metros. Meanwhile, rents rose 5.6% nationally year over year.
One month ago, we introduced the Trulia Price Monitor and Trulia Rent Monitor as the earliest leading indicators of how asking prices and rents are trending nationally and locally. So what happened to prices and rents in April?
April’s Price Rise Makes a Three-Month Streak
Nationally, housing prices have bottomed and are on the rise. Asking prices on for-sale homes were 1.9% higher in April than one quarter ago. A 0.5% month-over-month rise in April, on top of month-over-month price increases in March and February, makes for three months in a row of rising asking prices, after adjusting for typical seasonal trends. In fact, prices have been stable or rising for the past eight months, except for a dip in December 2011. This marks a new milestone: asking prices were 0.2% higher in April than a year ago. Before April, prices were still falling year-over-year.
Not only are rising prices starting to look like a real trend: they’re also coming to a market near you — if they haven’t already. Asking prices increased year-over-year in 44 out of the 100 largest metropolitan areas, with Miami and Phoenix leading the charge. Why these markets? One factor is job growth, which boosts housing demand. Miami, Phoenix, Warren-Troy-Farmington Hills (suburban Detroit) and Denver all saw strong employment gains in the past year. Another factor is the big price declines after the bubble, which attracted house hunters and investors searching for bargains to those markets. Most of the metros with the largest price increases in the last year had huge price declines during the bust, including Phoenix, Warren-Troy-Farmington Hills and the four Florida metros in the top ten. But among the metros with the largest price declines over the past year, only three–Sacramento, Las Vegas and Fresno–had huge overall price drops after the bubble burst.
| Top 10 Metros With Largest Price Increases | ||
| # | U.S. Metro | Y-o-Y % Change in Asking Price |
| 1 | Miami, FL | 16.1% |
| 2 | Phoenix, AZ | 15.8% |
| 3 | Cape Coral-Fort Myers, FL | 14.1% |
| 4 | Pittsburgh, PA | 8.5% |
| 5 | West Palm Beach, FL | 7.4% |
| 6 | Warren-Troy-Farmington Hills, MI | 6.9% |
| 7 | Orlando, FL | 6.5% |
| 8 | Denver, CO | 6.3% |
| 9 | Bethesda-Rockville-Frederick, MD | 5.2% |
| 10 | Little Rock, AR | 4.8% |
| Top 10 Metros With Largest Price Declines | ||
| # | U.S. Metro | Y-o-Y % Change in Asking Price |
| 1 | Tacoma, WA | -8.5% |
| 2 | Columbia, SC | -7.2% |
| 3 | Seattle, WA | -6.4% |
| 4 | Wilmington, DE-MD-NJ | -6.1% |
| 5 | Gary, IN | -5.5% |
| 6 | Sacramento, CA | -5.4% |
| 7 | Milwaukee, WI | -5.4% |
| 8 | Las Vegas, NV | -5.3% |
| 9 | Atlanta, GA | -5.0% |
| 10 | Fresno, CA | -4.7% |
Note: Rankings based on the year-over-year changes in asking price among the 100 largest U.S. metropolitan areas. Want to see the full list of price and rent changes for all 100 metros? You can download it here.
Seattleites, take heart: in the most recent quarter, most of the metros with year-over-over price declines have turned around. Prices rose quarter over quarter in 92 of the 100 largest metros, including in Seattle, Las Vegas and Atlanta. See the full list of metros with yearly and quarterly price changes here.
Rents Keep Marching Upward
Rental demand remains strong, with rents rising 5.6% nationally year over year. One reason for this continuous climb is job growth, as the metros with the largest rent increases tend to have fast job growth, like San Francisco and San Jose. But another reason why rents keep going up is the decline in homeownership: foreclosures forced some owners to become renters, while tight credit and the weak job market put homeownership out of reach for many others. The result: rents have risen even while prices were falling, and now that prices are rising, rents are rising even faster.
| Top 10 Metros With Largest Rent Increases | ||
| # | U.S. Metro | Y-o-Y % Change in Asking Rent |
| 1 | Edison-New Brunswick, NJ | 15.6% |
| 2 | San Francisco, CA | 13.2% |
| 3 | Miami, FL | 12.3% |
| 4 | Warren-Troy-Farmington Hills, MI | 11.8% |
| 5 | Indianapolis, IN | 11.1% |
| 6 | Colorado Springs, CO | 10.2% |
| 7 | Denver, CO | 9.8% |
| 8 | Middlesex County, MA | 9.7% |
| 9 | Kansas City, MO-KS | 9.6% |
| 10 | San Jose, CA | 9.6% |
Note: Rankings based on the year-over-year changes in asking rents among the largest U.S. metropolitan areas. Want to see the full list of price and rent changes for all metros? You can download it here.
Let’s Get Local: What About Prices and Rents in My Neighborhood?
Even within a metro area, neighborhoods have their own price and rent trends. This month we looked at trends within five large metros: New York, Los Angeles, Chicago, Washington DC and the San Francisco Bay Area.
In the New York area, prices rose year over year in Brooklyn, Manhattan and Staten Island, while declining in the rest of the region. But rents rose everywhere – both in the City and suburban areas.
| New York City Area | ||
| Borough or County | Y-o-Y % Change in Asking Price |
Y-o-Y % Change in Rent |
| Brooklyn | 2.4% | 5.7% |
| Manhattan | 1.1% | 6.8% |
| Staten Island | 0.8% | * |
| Hudson, NJ (Jersey City) | -0.2% | 7.7% |
| Queens | -1.6% | 7.1% |
| Bronx | -1.7% | 4.7% |
| Nassau, NY (Long Island) | -2.1% | 4.5% |
| Bergen, NJ (Hackensack) | -3.0% | 2.0% |
| Westchester, NY | -3.1% | 3.4% |
Note: In these tables, asterisks (*) denote areas where sample sizes are too small to report year-over-year changes in rents.
In Los Angeles, asking prices increased only in the downtown area. Prices fell elsewhere throughout the region, most of all in Long Beach. As in New York, though, rents rose throughout the region, except for Long Beach, with downtown LA experiencing both the biggest increases in prices and rents.
| Los Angeles | ||
| Area Code | Y-o-Y % Change in Asking Price |
Y-o-Y % Change in Rent |
| Downtown LA (213) | 3.8% | 8.9% |
| Riverside (951) | -0.1% | 1.8% |
| San Fernando Valley (818/747) | -0.7% | 4.5% |
| Orange County South (949) | -0.9% | 4.9% |
| San Bernardino (909) | -1.6% | 5.5% |
| Central LA (323) | -1.8% | 4.2% |
| Pasadena / San Gabriel Valley (626) | -3.4% | 4.0% |
| Orange County North (714/657) | -3.5% | 3.1% |
| Westside LA/Beaches/ Coast (310/424) | -3.5% | 1.9% |
| Long Beach (562) | -4.8% | -6.3% |
In Chicago, asking prices fell in all areas, but the northern and southern suburbs fared worst.
| Chicago | ||
| Area Code | Y-O-Y % Change in Asking Price |
Y-O-Y % Change in Rent |
| Chicago except downtown (773) | -2.0% | 5.6% |
| Loop and Near North Side (312) | -2.1% | 8.8% |
| Western Suburbs (630/331) | -2.3% | 8.2% |
| North/Northwestern Suburbs (847/224) | -4.1% | 3.3% |
| South Suburbs (708) | -6.7% | * |
In the Washington DC area, prices rose throughout the region, though least in Prince George’s County, MD.
| Washington DC | ||
| County | Y-O-Y % Change in Asking Price |
Y-O-Y % Change in Rent |
| District of Columbia | 5.2% | 4.0% |
| Montgomery, MD | 4.9% | 0.7% |
| Prince William, VA | 4.9% | 11.5% |
| Loudoun, VA | 4.8% | 5.2% |
| Fairfax, VA | 3.3% | 5.7% |
| Arlington and Alexandria, VA | 2.0% | 4.4% |
| Prince George’s, MD | 0.6% | 4.7% |
Note: Fairfax county includes Falls Church and Fairfax cities. Prince William county includes Manassas and Manassas Park cities.
Finally, in the San Francisco Bay Area, rents were on a tear, rising more than 10% in San Francisco itself, San Mateo county and Alameda county. But asking prices were up in San Francisco while down in Oakland.
| San Francisco Bay Area | ||
| County | Y-O-Y % Change in Asking Price |
Y-O-Y % Change in Rent |
| San Francisco | 2.5% | 11.9% |
| Santa Clara (San Jose) | 1.7% | 9.6% |
| Contra Costa | 0.6% | 6.0% |
| Marin | -0.8% | * |
| San Mateo | -1.7% | 15.9% |
| Alameda (Oakland) | -4.9% | 11.7% |
What patterns emerge? Among these large metros, the most central urban areas tend to have larger price increases (or smaller declines) than suburban areas, but there are exceptions – and there’s no general pattern across the US overall. In the Atlanta region, prices year on year were down less (-2.9%) in Atlanta (404 area code) than in the suburban areas (-5.5%, outside the 404 area code). However, in the Seattle region, prices year on year were down more (-6.6%) in Seattle itself (206 area code) – than on the Eastside (-5.2%, 425 area code). But what the quarter-over-quarter trend tells us is that it’s going to get harder to find neighborhoods where prices are declining.
Will the rise in asking prices and rents continue next month? Check back in on Tuesday, June 5, 2012 at 10AM ET to find out when we release the findings from May.
How did we put this report together? To recap the methodology, the Trulia Price Monitor and the Trulia Rent Monitor track asking home prices and rents on a monthly basis, adjusting for the changing composition of listed homes. The Trulia Price Monitor also accounts for the regular seasonal fluctuations in asking prices in order to reveal the underlying trend in prices. The Monitors can detect price movements at least three months before the major sales-price indexes do. Last month’s post explains how the Monitors compare with other price indexes out there, and our FAQs provide all the technical details.
Home Prices Are Up. Haven’t You Heard?
Find Out Where Asking Prices and Rents Are Heading, Almost In Real-Time, With the New Trulia Price Monitor and Trulia Rent Monitor
I rely on the major sales-price indexes – Case-Shiller, Federal Housing Finance Agency (FHFA) and CoreLogic – as much as the next guy (or the next housing economist, anyway). They’re essential for understanding where home prices have been going. But they come out between five and eight weeks after each month ends, and the sales prices they report are rooted in asking prices set two or three months earlier. Doing these sales-price indexes right takes time – but buyers, sellers, investors and policymakers need to know what’s happening in the housing market now.
Starting today, we’re closing this gap. The Trulia Price Monitor and the Trulia Rent Monitor show every month what’s happening to asking prices and rents almost in real-time. By focusing on asking prices and releasing each month’s Monitors just days after each month ends, we can detect price movements at least three months before the major sales-price indexes do.
What are the Trulia Price Monitor and Trulia Rent Monitor?
To create the Trulia Price Monitor and Trulia Rent Monitor, we take all the for-sale homes and rentals ever listed on Trulia.com and calculate how asking prices and rents changed month by month. Rather than simply tracking the average or median, we adjust for the changing composition of homes that are listed each month. Therefore, these Monitors reflect the price and rent trends for similar homes in similar neighborhoods over time. For the Trulia Price Monitor, we also account for the regular seasonal fluctuations in asking prices in order to reveal the underlying trend in prices.
The Trulia Price Monitor differs from the major sales-price indexes in important ways.
First, we focus on asking prices. Final asking prices lead sales prices by about two or three months, reflecting the time that homes are typically on the market. In 2011, the Trulia Price Monitor’s national month-on-month changes track the seasonally-adjusted month-on-month changes in Case-Shiller and FHFA two months later. Asking prices, however, are NOT a perfect predictor of sales prices: the final sales price for a home can be above or below asking, and some listed homes might not sell. Asking prices and sales prices each have their advantages for understanding the housing market: asking prices have the advantage of showing current market conditions and trends, but sales prices are the best guide to historical and long-term trends in the housing market.
Second, the Trulia Price Monitor uses a different statistical approach: a “hedonic” rather than “repeat-sales” method. The explanation gets technical pretty quickly, but we’ve provided all the details in our FAQs.
Here’s what to expect from us: in the first few days of each month, we will publish price and rent trends for the previous month, for the nation as a whole and for the largest metro areas (for prices, the 100 largest; for rents, most of the 100 largest). We report monthly, quarterly and yearly changes nationally, plus quarterly and yearly changes at the metro-level. Our approach lets us dig deep: in the future, we’ll look at price trends for single-family homes versus condos; homes with one, two and three or more bedrooms; downtown versus suburban trends; and more. Have some other comparison that you’d like us to make? Email us and let us know.
Madness! Asking Home Prices Moved Up in March
Let’s get to the facts. Nationally, asking prices on for-sale homes were 1.4% higher in March than one quarter ago. Prices increased month over month by 0.9% in March and 0.6% in February. What we found through the Monitor is that asking prices had been declining prior to February and reached a low in January 2012. Throughout 2011, asking prices rose slightly in several months of the year, but never more than 0.2% in a month. Asking prices in March were 0.7% below their level one year earlier.
One thing to keep in mind — because the Trulia Price Monitor is seasonally adjusted, these monthly and quarterly increases are on top of typical springtime price jumps. Without adjusting for seasonality, asking prices rose 2.4% quarter over quarter.
Asking Home Prices Are Looking Up for the Sunshine State
But all housing is local. On the up side, the Trulia Price Monitor revealed that asking prices rose year over year in all large Florida metros, and fastest in Cape Coral-Fort Myers and Miami. Asking prices also rose in Phoenix, Pittsburgh and the Detroit area. Meanwhile, local housing markets in much of the West continue to struggle. Prices fell most in Tacoma and Seattle, followed by Sacramento and Las Vegas. All large California metros saw year-over-year price declines. Just check out this metro-level map and see for yourself. Florida and Michigan are looking mighty green (which means rising prices) whereas California is in the red (which means falling prices).
Why do we see price increases in some places and price declines in others? As a general rule, prices are now rising faster in places where prices fell more during the bust and where vacancy rates are higher. In other words, many of the local price increases are bouncebacks: Cape Coral-Fort Myers, Miami and Phoenix all saw huge price drops after the bubble burst and big increases in asking prices this past year. But there are exceptions: Las Vegas prices continue to fall, even after years of steep price declines.
| Top 10 Metros With Largest Price Increases | ||
| # | U.S. Metro | Y-O-Y % Change in Asking Price |
| 1 | Cape Coral-Fort Myers, FL | 14.8% |
| 2 | Miami, FL | 14.1% |
| 3 | Phoenix, AZ | 13.2% |
| 4 | Pittsburgh, PA | 9.2% |
| 5 | Little Rock, AR | 6.7% |
| 6 | Orlando, FL | 6.3% |
| 7 | North Port-Bradenton-Sarasota, FL | 6.2% |
| 8 | Palm Bay-Melbourne-Titusville, FL | 6.1% |
| 9 | West Palm Beach, FL | 5.8% |
| 10 | Warren-Troy-Farmington Hills, MI | 5.6% |
| Top 10 Metros with Largest Price Decreases | ||
| # | U.S. Metro | Y-O-Y % Change in Asking Price |
| 1 | Tacoma, WA | -11.9% |
| 2 | Seattle, WA | -9.1% |
| 3 | Sacramento, CA | -8.3% |
| 4 | Las Vegas, NV | -7.7% |
| 5 | Wilmington, DE-MD-NJ | -7.7% |
| 6 | Columbia, SC | -7.3% |
| 7 | Cleveland, OH | -6.9% |
| 8 | Fresno, CA | -6.8% |
| 9 | Milwaukee, WI | -6.7% |
| 10 | Allentown, PA-NJ | -6.7% |
Note: Rankings based on the year-over-year changes in asking price among the 100 largest U.S. metropolitan areas. Want to see the full list of price and rent changes for all 100 metros? You can download it here.
No Wonder Your Landlord is Smiling
What about rentals? Nationally, rents rose by 5.0% year on year: unlike prices, rents have been moving steadily upward. During the recession, some owners lost their homes and became renters instead; also, many younger adults deferred the leap from renting to owning. Strong rental demand, combined with little new rental construction, pushed rents higher.
Asking rents rose over the past year in almost all large metro areas included in the Trulia Rent Monitor – regardless of whether asking home prices were going up or down. For example, rents rose strongly in Miami (12.1%) and Denver (9.9%), where for-sale prices also increased. Meanwhile, rental affordability declined in places where rents rose while prices fell, most notably in San Francisco (rents up 11.1%), Seattle (9.7%), San Jose (9.4%) and Boston (9.2%). As for the very largest metros, rents rose 6.2% in New York and 6.1% in Chicago, but only 0.6% in Los Angeles.
So what drives rent trends? Employment growth matters most. San Francisco, Denver, Seattle, San Jose and Austin all had high year-on-year employment growth (through February 2012, according to the Bureau of Labor Statistics) and big rent increases.
Is This Bounceback Here To Stay?
Will these price and rent increases continue? Continued job growth plus declining inventories equal more buyers chasing fewer homes – and therefore higher prices. The big wildcard for prices is the next wave of foreclosures. The robo-signing settlement will accelerate foreclosures, which will ultimately depress prices in neighborhoods where foreclosures are concentrated. Rents this year depend on both job growth and new construction: last year builders broke ground on many multi-family buildings, which should come to market later this year and dampen rent increases.
Want to be the first to know how foreclosures, construction and jobs are affecting prices and rents in April? Come back in early May, when we’ll release the April 2012 Trulia Price Monitor and Trulia Rent Monitor.
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