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U.S. Home Prices Surpass Pre-Recession Peak Amid Healthy Sales

A home for sale sits behind a sign that reads, "sale pending,"in San Diego, Aug. 14, 2013.
Associated Press
A home for sale sits behind a sign that reads, "sale pending,"in San Diego, Aug. 14, 2013.
U.S. Home Prices Surpass Pre-Recession Peak Amid Healthy Sales
U.S. Home Prices Surpass Pre-Recession Peak Amid Healthy Sales GUEST: Mark Goldman, finance lecturer, Fowler College of Business Administration, San Diego State University

Update on sending a real estate market as housing prices are back to pre-recession levels. It's 12: ¬20 into KPBS Midday Edition. Is 12:20 are listening to KPBS Midday Edition. KPBS class of home values essential feature, what followers those sales owners binding themselves underwater and at worst foreclosures. That is why today's news from standard home price index home prices have fully recovered from the recession collapse San Diego's home prices are not as high as a pre-recession peak in 2006 but values are steadily gaining. So is this good news for sellers, bad news for buyers and what can we do to avoid another housing bubble. Domain is Mark Goldman finance lecturer at the Fowler school of business at Senegal State University welcome to the program. Nice to be back. What the information comes down to for a lot of people is is this a good time to sell your house. It's a good time to sell your house if you want to sell it in a hurry. There are limited inventory available so there's not very many houses on the market houses on the market price probably are receiving multiple offers. In order to retain value of your home you can put it on the market and get the value? Yes but not only was in have come back to where they were in 2007 but values are up and I think looking into the future market -- part of timing is where are we now await we think we are going. Value, the change in value, values continue to go up but I think the rate they are going to go up will be somewhat slower in the future. And will increased sales, because buyers are getting the value from their home, for their home will that help limited inventory problems in San Diego will it help buyers? When you say limited inventory I think of two categories supply, numbers of units and real estate agents speak of a majority meaning number of units that exist that are on the market available-for-sale. Both are in shortage. We need out -- more housing units the market supply and the total number of housing units in San Diego is too low. Median house price in San Diego is more than double the national median price pay people have more income and means are able to pay more for the house and if they want to own a home they will bid up the price and that coupled with the fact that those who own homes it is hard to find a home because of the shortage the people have homes may be more reluctant to put them on the market for sale, where do they move to, they would have to buy another place. And that helps to push up the price because the number of houses that are available for sale are very limited in San Diego. People predict interest rates may be going up because of policies in a new trump administration. How do you see that affecting the housing market? People like to get out ahead of anticipated hike in interest rates so initially it will drive more people who are on the fence about purchasing a home the next, a beer. People perceive rates will go up they will jump into the market higher interest rates will drive down the portability a limiting factor I see in the market right now in San Diego. Good news, I does the a lot of speculation built into the market there are good deals there are people who speculate in real estate and that always exists but that sector of the market it's much smaller now. The typical homebuyer, consumer of housing is in a competitive market right now and if they anticipate a long-term hold that would be a great time to get in. One of the takeaways from the prerecession housing market was real estate was overpriced, housing bubble, people called it. Arduino housing prices are not being inflated again? You never know for sure but I do not see any signs of it now housing bubble in my world equals speculative investments and housing and speculation is when you purchase a house because you think some greater for will play more -- pay more than you did. That's moderated quite a bigger the main reason for that is the lack of what I called stupid financing in 2005, 26 any fool who wanted to buy house could pay a price for it and they were lenders would lend money whether or not they qualify for it or not it that has tightened up these days and lenders are much more careful about borrower's ability to repay a loan and also about the value of the property appraisal requirements have become more strict. Look because of the law -- lending industry and tightening standards you think the values reflected in this case are true values? I think they are always true values in that they measure what is going on in the market. One thing I want to point out is case Shiller numbers are two was also will receive November announcement, we are looking at September housing prices. I think the motivation moving pricing up San Diego we are in the low fives going up a little under the national average. 5% increase ? Yes, Thank you. We are moving up at what we called Goldie lock rate not too hot or cold. A sustainable rate of growth. Sustainable meaning we are not seeing the market running up at a very high rate of appreciation we saw in early 2000, 15, 20% per year. That's indicative of speculation in the market. There's a lot of forces holding the rate of appreciation down to a sustainable rate of growth and 5% is still above, if we look at housing changes, change in housing prices over 10 their years in America they tend to run 3-3.5% per year if you look at 100 trendline so we are still a little about but this is sustainable and finally one other issue about the 5%, a lot of people anticipate inflation coming up with this new administration, anticipating reduction in taxes and increase in public spending and that is inflationary. And wages hopefully will be part of that, hopefully we will see wages go up affecting affordability. And also real estate tends to react to inflation. We will see some price increases but I think it is going to slow down. I've been speaking with Mark Goldman finance lecturer at the Fowler school of business San Diego State University. Thank You.

U.S. home prices have fully recovered from their steep plunge during the housing bust and Great Recession, according to a private measure.

The Standard & Poor's CoreLogic Case-Shiller national home price index, released Tuesday, is slightly above the peak it set in July 2006, after rising 5.5 percent in September from a year earlier. The milestone comes after more than four years of steady gains.

Still, prices have not fully recovered in many cities and other gauges show that home prices remain below their peaks.

Steady job gains and low mortgage rates have encouraged more Americans to buy homes. Yet the supply of available properties has dwindled, setting off bidding wars and pushing up prices at a rapid pace.

Seattle, Portland and Denver reported the largest annual gains in September for the eighth straight month.

"The new peak set by the S&P Case-Shiller CoreLogic national index will be seen as marking a shift from the housing recovery to the hoped-for start of a new advance," David Blitzer, managing director at S&P Dow Jones Indices, said.

The ongoing recovery in home prices shores up Americans' household wealth and should provide more homeowners the incentive to sell. The number of homes for sale is low partly because many families have little equity in their homes and would benefit little from a sale. Rising home values help counter that trend.

Yet many cities remain far below their pre-recession peaks, Blitzer said, including those that have seen large gains since the downturn, such as Miami, Tampa, Phoenix, and Las Vegas.

And other analysts caution that imbalances remain in the housing market.

"Inadequate supply of homes available to buy — especially at the entry-level end of the market — remains a huge problem," Svenja Gudell, chief economist for real estate data provider Zillow, said.

And after adjusting for inflation, prices remain about 20 percent below their peak, according to Ralph McLaughlin, chief economist at Trulia, a home buying website.

"It's good news for homeowners," McLaughlin says, "but not so great news for homebuyers who have seen prices outpace incomes for most of the housing market recovery."

Since the real estate market began recovering in 2012, prices have grown much faster than Americans' incomes. That has made it difficult for many would-be buyers, particularly younger Americans, to take advantage of low mortgage rates.

RELATED: San Diego Housing Crisis Drives Some To Relocate, Others To Invest

Home prices have increased at a 5.9 percent annual rate, adjusted for inflation, S&P says. Yet Americans' after-tax incomes have increased just 1.3 percent during that time.

Jonathan Smoke, chief economist for Realtor.com, said that many buyers who were unable to find homes during the summer buying season continued searching in the fall, pushing up demand at a time when it typically drops off.

"This was a very strong offseason compared to normal," he said.

Mortgage rates have risen about a half-percentage point since the presidential election, to nearly 4 percent. That is still very low by historical standards, but could slow home sales in the coming months.

According to the S&P Case Shiller national home price index, home prices plummeted 27.4 percent from a peak reached in July 2006 through February 2012. They have since recovered that loss and are now 0.1 percent above the previous peak.

S&P Case-Shiller issues several home price measures, including a composite index of 20 large cities. That measure remains 7 percent below its housing bubble peak.

Most other measures of the housing market point to a solid recovery. Sales of existing homes rose to the fastest pace in nearly a decade in October. And developers broke ground on the most new homes in nine years last month. Sales of new homes slowed in October from the previous month, but are up a solid 12.7 percent in the first 10 months of this year compared to the same period in 2015.