Home Prices Soar
Here?s some celebratory news for sellers. With inventory depleting, U.S. home prices jumped 7.3 percent in the year ended May, according to the Federal Housing Finance Agency. On a seasonally adjusted basis, prices rose 0.7 percent from April. Economists were expecting a 0.8 percent increase, according to Bloomberg.
The gain in prices indicates that the economy is indeed on the mend. A separate report by Zillow showed that home values increased 2.4 percent in the second quarter. That?s the largest gain for a second quarter since 2004, according to the report.
?The U.S. housing market as a whole is currently not experiencing a bubble, but in many places it sure must feel like one,? Zillow Senior Economist Svenja Gudell said in a statement. ?Homeowners are feeling a sense of whiplash after years of depreciation.?
The news is very encouraging for builders and sellers. When the market was inundated with inventory, builders held back from launching new projects. With home prices on the rise, home starts are expected to increase again. That would also help buyers, who would then have more options to choose from.
?Flip That House? Makes a Comeback
When the housing market crashed, it tanked investor confidence and U.S. reality television programs such as ?Flip That House.? But, with home prices on the mend and mortgage rates at historic lows, bargain hunters are again on the prowl. So are the television cameras that follow them around, according to news reports.
Fast declining inventory and improving home prices have again attracted house flippers, who are constantly looking for a sweet deal. With home prices increasing they are again making some good profits.
?It?s all about pricing,? Richard Sluzewski, who has been flipping houses in Daytona Beach, Florida, for 22 years told the Financial Times. ?Everyone is expecting property values to keep on climbing, so it?s a great time for flippers. Investors are spending more on renovating homes now compared to last year, knowing that buyers are willing to pay more. With such low supplies, it?s a sellers? market for sure.?
House flipping deals are expected to hit a record high this year. They were up 19 percent in the first half of the year from 2012. When compared to 2011, they are up 74 percent.
Profits have touched the highest level in seven years. On average, investors are making $18,391 on each sale. That?s more than triple returns in the first six months of 2012. Two years ago investors had incurred losses of $13,206.
Mortgage Rates Drop
For the second straight week, the average rates on fixed mortgages fell, bringing much relief to homebuyers who want to snag a good deal and lock in low rates on a new home.
According to mortgage firm Freddie Mac, the average rate on 30-year loans fell to 4.31 percent compared to 4.37 percent last week. But it?s nearly a full percentage point higher than in early May.
The average rate on 15-year loans declined to 3.39 percent. That?s down from 3.41 percent last week. The shorter loans are favorites among consumers looking to refinance.
After staying at historic lows for a long time, rates had reached a two-year high of 4.51 percent two weeks ago in anticipation that the Fed would slow down on bond buying. Bond purchases have helped keep rates at bay, encouraging buyers to lock in low rates. Economists believe that a rate increase would slow down the housing recovery process.
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