Strong Gains for Home Sales, Prices


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For the first time in seven years, annual U.S. home sales have improved from one year to the next, with 2012 sales showing a 6 percent increase over 2011 figures, according to figures released today by CoreLogic.

Last year saw a total of 4.2 million home sales, according to CoreLogic's figures, up from 3.9 million in 2011. It's the first whole year-over-year increase since 2005.

Home prices were up as well, posting a 6.3 percent increase over 2011, based upon repeat sales of the same property. That was the largest year-to-year increase since 2006, according to CoreLogic Home Price Index.

"Housing was one of the past year's biggest surprises," wrote Mark Fleming, chief economist for CoreLogic, summarizing the past year. "Even without significant gains in income, housing mounted an impressive recovery in 2012."

Strong prices increases expected in 2013

Looking ahead, the company is expected a further 6 percent rise in U.S. home prices in 2013, with a combination of low mortgage rates and home prices driving steady demand, along with a reduced level of foreclosure sales and a limited inventory of unsold homes.

Despite the healthy increase in home sales last year, the total number of homes sold remains well below the 5.5 million annual figure that was typical in early 2000s.

The major factors driving the improvement in the housing market in 2012 were a reduction in foreclosure sales and a smaller inventory of homes for sale, according to Sam Kahter, a CoreLogic senior economist. He wrote that the decline in foreclosure sales drove a sharp improvement in home prices last year, as mortgage servicers pursued short sales and other alternatives to foreclosure in dealing with distressed properties.

Underwater homes limit sales inventory

Ironically, a key factor driving the increase in home values in 2012 was that many homeowners have seen their homes sharply fall in value since the housing bubble collapsed. The large number of underwater mortgages means that many homeowners who would like to sell are holding their properties off the market until home values recover. That has limited the supply of available homes for sale, driving up prices.

Rising prices are expected to bring more of these homeowners onto the market in coming years, but not so fast that they flood the market and drive prices down.

Foreclosure sales, delinquencies show big drops

A key factor in the improvement of the housing market in 2012 was a sharp rise in nondistressed home sales, which increased 11 percent over their 2011 levels to 3.2 million units. Meanwhile, sales of foreclosed residential properties dropped 20 percent to 600,000, while short sales increased 23 percent to 370,000 units, their highest level since the housing crash.

As a share of the market, foreclosure sales dropped sharply throughout the year, from 20 percent of all home sales in January 2012 to 11 percent in October, the most recent month for which figures were available.

Mortgage delinquencies were also down significantly in 2012, falling by 300,000 loans to 6.9 percent of outstanding mortgages, down from 7.4 percent in 2011. Serious mortgage delinquencies are down by 1 million loans from their peak in 2010.

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This article appears in: Personal Finance Real Estate
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