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Mid-Year Housing Check: Firing on Most Cylinders
Jed Kolko / Trulia / July 30, 2013
In June, the housing market was 54% back to normal, down from 60% in May. But looking back at the first half of 2013 reveals a housing recovery that’s moving ahead with few red flags.
Instead of our usual monthly Housing Barometer, we’re taking a mid-year temperature check of the housing market while looking ahead at what to expect throughout the rest of this year. All three of our regular Housing Barometer measures – new construction starts, existing home sales, and the delinquency + foreclosure rate – stumbled in June, pushing the recovery down from 60% “back to normal” in May to 54% in June. But June’s numbers mask favorable underlying trends for all three metrics:
- New construction starts (Census) were up 24% in the first half of 2013 compared with the first half of 2012.
- Existing home sales (NAR), excluding foreclosures and short sales, were up 32% year-over-year in June.
- The delinquency + foreclosure rate (LPS First Look) was down 14% year-over-year in June.
Overall, the housing recovery is in healthy shape. Here’s a round-up of the top three changes in the housing market so far in 2013:
- Prices climbed steeply, outpacing rents, but are far from bubble territory. According to the Trulia Price Monitor, asking home prices were up 10.7% year-over-year in June. Prices rose year-over-year in 99 of the 100 largest metros, most sharply in California and elsewhere in the West. In contrast, rents rose just 2.8% year-over-year nationally. But this is a rebound, not a bubble: prices still look 7% undervalued compared with long-term fundamentals, and buying a home is still 37% cheaper than renting. However, today’s rapid price gains won’t last: fading investor demand, rising mortgage rates (see #2), and more homes for sale (see #3) should all slow down price gains and prevent us from getting back into a bubble.