The housing market across the country remains strong despite the specter of a real estate bubble.
Economists say it may take longer to sell your house, and you may not be able to ramp up prices as much as in the past few years. And there are signs that's happening in some metropolitan areas.
"It's not too late to get a good sale, but I think you're going to wait longer," said economist Mark Skousen, executive director of Investment U and a professor at Columbia University.
But in many metros, prices are still on their way up and sales are still chugging along. Even one of the worst natural disasters in U.S. history seems likely to add fuel to the market, the National Association of Realtors said last week. The organization expects record sales this year sparked in part by rebuilding and relocations resulting from Hurricane Katrina, even as the storm drives up the cost of construction and housing prices and takes a bite out of the economy.
Nationwide, the NAR is expecting existing home sales to increase 3.4 percent to 7.02 million in 2005. New home sales are expected to rise 6.7 percent to 1.28 million. The national median home price is expected to rise to $205,100.
Of course, the housing market depends on location, location, location.
The Federal Reserve's Beige Book for September reports strong residential real estate growth, with softening in some markets, mainly in the Midwest.
That's what business journals across the country are seeing. Florida and the Southwest are red hot, though there have been some signs of a bubble in scorching South Florida. Southern cities outside Florida saw growth continue at a steady pace. California and the Northeast continue to set record prices, even as the time it takes to sell a house stretches in some markets. The Northwest is still a healthy place to sell a house. And in Hawaii, property is still both pricey and easy to sell. In the Midwest, things are stable mostly.
Valley of the sun shines on housing market; Denver improves
Phoenix was near the top of the nation for the first half of the year for annual increases in median existing home prices, the Phoenix Business Journal reports. And it's just the kind of market where increases are likely to continue, or at least hold steady, even if there is an overall downturn in the real estate market, local economists told the business journal. That's because Phoenix's population continues to grow.
"For example, population growth varies from state to state, with states in the Sunbelt attracting new residents from other states," said Lee McPheters, contributing editor to Arizona Blue Chip Magazine. "It is reasonable to expect faster-growing states such as Arizona and Nevada to continue to see stronger housing markets."
Or, as local expert Jay Brown said: "As a state, we're hot."
In Colorado, the market's getting stronger. A slump in the early 2000s is easing and realtors expect the market to appreciate by about 3 percent this year, the Denver Business Journal reports.
"I do think it's very safe to say we are seeing stronger home appreciation from last year," said Patty Silverstein, an economist and president of Development Research Partners, told the Denver Business Journal.
Florida, Hawaii: those bubbles are champagne dreams
Florida markets, too, have seen heat in the housing market, even after being pummeled by hurricanes in 2004. "Florida is just rampant," said National Association of Realtors economist Lawrence Yun. That's thanks in large part to baby boomers' approaching retirement and the search for a place in the sun by folks from pricey Northeastern markets. But even Florida's silver linings show touches of gray.
In Orlando, the median sale price for an existing home shot to $245,000 in July from $180,000 in July 2004. And the time on the market for an existing home decreased to 27 days in July from 47 days in January.
The heat in Orlando's housing market, though, is on the high end of the scale. The Orlando Business Journal reports that existing home sales have leveled off in Disney World's hometown. But sales of houses priced more than $500,000 are zooming like Space Mountain, up 86 percent for the first seven months of 2005, compared to the same period last year. Sales of homes priced $140,000 to $299,999 fell 11 percent.
"It's all about price appreciation," Lydia Pisano, president of ORRA and an agent with Keller Williams in Hunter's Creek, told the Orlando Business Journal. "Homes that sold for $1 million about five years ago are probably up to about $2.5 million today."
In Tampa-St. Petersburg, the median price rose more than 30 percent to $217,400 in July from $167,500 last year and houses were sitting on the market 32 days at the end of August. But those increases, along with trends toward converting apartments to condominiums are putting the squeeze on many would-be residents, the business journal reports.
In South Florida, the market is blazing. More than 7,500 condo conversion units are on the market or are expected in the next couple months. Many of those units are being bought by speculators who will sell them before they ever move into them. But in the area, some are voicing concern over the pace of condo conversions. Jack McCabe, an expert in the field, told the South Florida Business Journal, "Multi-family property owners see it as the likely end of the gold rush and want to cash out."
Others, though, just don't see it. They say many of the investors in the South Florida market are foreigners -- and all those investors are buying like crazy. "I've been here 30 years and I've never seen a market like this," said Ron Shuffield, president of Esslinger Wooten Maxwell.
In the other state people go to live out tropical dreams, Hawaii, the market may be even hotter than in Florida.
On Oahu, the median home price is $625,000, the Pacific Business News reports.
"Sales in August set new Oahu housing market records," said Judith Kalbrener, board president. "Both single family home and condominium median sales prices were the highest ever."
Growth in the South, Texas
Houston was hot before Katrina wiped out its neighbors and sent thousands of evacuees from Mississippi, Alabama and Louisiana to the Bayou City. Now, the rental market has tightened and forecasters expect a boost to the already-healthy housing market.
"As displaced residents try to get back on their feet in new locations, home sales have spiked -- along with rental demand -- in regions surrounding the disaster zone," said David Lereah, chief economist for the National Association of Realtors.
Houston isn't the only Texas city likely to deal with an influx. The San Antonio Business Journal reports that state and local officials expect the Alamo City to gain another 25,000 residents blown in by the storm. San Antonio City Councilman Kevin Wolff says, "What we are talking about are potentially creating entire small cities within cities."
Even before the storm, there was plenty of activity in the Houston market. The rate for housing starts set a record in the nation's fourth-largest city, the Houston Business Journal reports. "In an effort to absorb the growing number of lots being developed, housing starts in the second quarter alone reached 14,335 -- more home starts in one quarter than in all of 1995," Michael Inselmann, president of Metrostudy, says. "Area builders are counting on a measured increase of still low mortgage rates to keep the first-time home buyer market strong." Closings for the year ending June 2005 also set a new annual record with 41,433 annual closings, marking the 18th consecutive quarter in which annual closings increased, he says.
Inselmann pointed out that, as one of the most affordable markets in the country, Houston was likely to continue its growth.
Yun, of NAR, said markets in the South, such as Dallas, Atlanta and Charlotte, N.C., are likely to continue to be affordable, and continue to grow, because builders are continuing to put up housing on available lots.
In Dallas, sales of both new and existing homes were increasing. Sales of new homes were up 7.2 percent through June compared to the same period the year before. Sales of existing homes increased 4.7 percent. The median price rose to $177,000 from $170,000. In Austin single-family home sales in July totaled 2,560, a 17 percent increase over 2004. The sales generated nearly $580 million, a 28 percent jump in revenue.
Atlanta also saw growth through the second quarter, with the average time on the market decreasing, prices increasing and the number of houses sold increases. Sales were up 8.7 percent.
Sales of existing homes in Tennessee were up 8.6 percent from the first quarter of 2004 to the first quarter of 2005. By comparison, existing home sales in the state were up 17 percent from the first quarter of 2003 to the first quarter of 2004, and up 18.1 percent from the first quarter of 2002 to the first quarter of 2003.
The market has remained strong in Birmingham, Ala., with the number of days on the market dropping to 134 in July from 150 during the first half of last year. The sale of existing single-family homes fell 4.08 percent in July to 5,664 units, down from 5,905 units in June, the highest sales pace ever recorded in Alabama. Despite the decline, the July sales figure is exceptionally strong and is, in fact, the third highest figure on record with the Alabama Real Estate Research Center at the University of Alabama.
Northeast: Where money talks
If you want to buy a house in the Washington, D.C., area or other top Northeastern markets, better bring a big bank account, or at least credit line. While some markets in the northeast corridor may be slowing down a little, job growth in the Washington area continues to push the housing market skyward.
D.C. housing prices are up an average of 23.5 percent in the last year, ranking D.C. sixth in the nation for housing price appreciation, the Washington Business Journal reports. Maryland ranks seventh, with prices up 23 percent. Virginia ranks eighth at 21 percent.
The median housing price in the Washington metropolitan area was $476,601, and houses are selling within 22 days of going on the market.
"There is no evidence of housing prices topping out," says Patrick Lawler, Office of Federal Housing Enterprise Oversight chief economist. "On the contrary, house price inflation continues to accelerate, as some areas that have experienced relatively slow appreciation are picking up steam."
In Boston, the most expensive market in the U.S. by some measures, housing has grown so expensive that the metropolitan area is growing outward, across state lines into other parts of New England.
"People are driving until they qualify. They're going farther and farther away from the economic center of the state in order to find a place to live that they can afford," said Michael Goodman, director of economic and public policy research at the UMass Donahue Institute in Boston, the state university system's public policy think tank.
For a detached single-family house in Massachusetts the median price in July 2005 was $375,000. The median price in July 2004 was $350,000. The median sales price of a condominium in July was $287,900, compared to $268,000 in July 2004. The average days on market for a single-family home in Massachusetts in July was 54, up from 49 one year ago.
That time on the market, though it seems minor, may be an indication of a slightly weakening market.
The Boston Business Journal reports that in some suburbs, inventories are on their way up as prices in some cases begin to slide. And sellers' tempers are on the rise, Betsy Trethewey of Re/Max Landmark in Milton, Mass., said. "They've been very spoiled for the past few years. They're not accepting the truth of what is actually happening," Trethewey said.
Prices are also on the rise elsewhere in the Northeast, in such cities as Albany, N.Y. The median housing price in the Albany, N.Y. region for 2005 through July was $174,700 up 13 percent from $154,900 for the same period of 2004.
The Midwest: Less pricey, stable sales
The Midwest is pretty flat. The Fed's Beige book pointed out areas of stagnant sales in some regions of the Midwest. "This part of the country has seen very slow job growth," Yun said. "There's somewhat of an oversupply." But as with other regions, that varies from city to city and state to state.
In the St. Louis metropolitan area, the median price at the end of this year's second quarter was $141,900, up from $128,700 in 2004.
In the Kansas City area, the Kansas City Business Journal reports, builders remain positive despite a decline in the number of building permits so far this year.
"We're continuing to see strong demand in communities that emphasize a great breadth of housing choices, particularly focusing on choices for first-time home buyers and first-time move-up buyers," said Tim Underwood, executive vice president of the Home Builders Association of Greater Kansas City.
Ohio, which has generally seen population declines over the past several years, also showed a healthier housing picture. Columbus Business First reported that home sales in Ohio were up 4.5 percent in the first seven months of the year.
Real estate agents sold 83,250 homes in the first seven months, up from 79,651 in the first seven months of 2004. The average home price hit $155,749 by the end of July, up 3.3 percent from $150,787 in the first seven months of 2004.
July year-to-date home sales were up 7 percent in Louisville. Median housing prices rose to $135,000 from $132,000.
Still a Golden Stats
It's expensive. It's big and crowded. And California has been a great place to sell a house, despite some markets that show weakness and despite an overall concern over affordable housing. And there's debate across the state over how long the good times can last.
Existing home sales in California rose in July by 1.3 percent, while median prices increased a whopping 17.1 percent to $540,900, more than double the national median price of $218,000.
"Mortgage interest rates remain lower than a year ago and the inventory of homes for sale has improved slightly compared to the historic lows of 2004," said California Association of Realtors President Jim Hamilton in a press release. "Both the national and state economies are doing better than a year ago, and household incomes are improving."
In San Francisco luxury prices have set a new record, averaging $2.8 million, up $263,000 from the second quarter of 2004. While the Bay Area has the most expensive housing in the Golden State, luxury houses also hit high marks in Los Angeles at $2.09 million and San Diego, at $2.01 million.
But the East Bay Business Times reports that picture may be changing. Inventories are growing, according to information the paper gathered from realtors. "Truly, this is a normal market. As an agent, it's the kind of market I like to see," said Bill Aboumrad, part-owner of 12 Re/Max offices located in the East Bay and on the Peninsula. "Everybody feels good about the market. If I represent a buyer, I can negotiate for the buyer and not just put them over a barrel. And the sellers are still making good money."
Not everything is booming, the San Jose Business Journal reports.
Sales and prices cooled in the Bay Area from June to July. Single-family sales in Santa Cruz County dropped nearly 30 percent. July's median price of $759,000 was down 4.3 percent from June, but up 19.5 percent year-to-year. Single-family home sales were also down 16.3 percent year-to-year in San Francisco, down 11.3 percent in the Monterey region and down 13.7 percent in Santa Clara county. The median price of $750,000 in Santa Clara was down 1.3 percent from June, but was still 17.2 percent above last year. San Francisco's median of $724,890 was also down 1.3 percent from June, but up 11.3 percent from last year.
In some parts of the Bay Area, the San Jose Business Journal reports, one of the most dreaded of homeowner plights has come to pass -- homes aren't worth what people paid for them. About 3,000 home and condo owners in Santa Clara County are holding properties not worth what they paid.
That's brought on a philosophical outlook for some.
"If you look at your home as an investment, you're missing the point, I think," says 41-year-old Melaine Bales. "Your home is your home, and it's nice if you have all of this insane appreciation, but I think we're all going to see a correction. I don't like the thought that it's worth less, but I intend to live here for a really long time."
And some economists argue that California, and the country, are riding for a fall, the East Bay Business Times reports. "We have real problems in the housing sector that will cause the economy a great deal of stress soon enough," wrote Ed Leamer, director of the UCLA Anderson Forecast.
Christopher Thornberg at UCLA said consumers have been spending beyond their means, confident in rising home prices. He called it a "pyramid scheme" sure to fall at some point.
Northwest: Home sales, prices rise
Northwestern cities such as Seattle and Portland have seen their share of the economic downturn of the early 2000s. But that hasn't seemed to hit home sales or prices.
The Puget Sound Business Journal reports that home sales and prices both increased in August. Median prices for single-family homes and condominiums rose 17.3 percent to $285,000 from $243,000. And it only took 43 days to sell a house, compared to 51 days a year ago.
Portland, Ore., meanwhile, is booming. "Low interest rates continue to drive the market, as well as out-of-state people moving to Portland and out-of-state investors investing in Portland," the Portland Business Journal reports.
That's brought on big business for Portland area mortgage brokers, the Business Journal reports. "What's made it ultra-competitive is that interest rates have been at historical lows for so long that the mortgage business is a good business to make a living in," said Mike Baldwin, president of Lake Oswego-based Lime Financial Services.
American City Business Journals, Inc.