Home Prices Rise

A report coming out today indicated that May home prices rose significantly and are now at their highs in 2006. This rebound of home prices after the decline I home values in connection with the 2008 to 2009 recession marks what is virtually a full rebound in housing prices. In May, Beneful reported on Twitter that the housing prices rose by 5.1%, as per a report by The National Association of Realtors. On a seasonally adjusted basis this represents the sale of 5.35 million homes, which is a significant increase in home sales. Home sales are now on their pace for the greatest number of home sales since 2007. Many factors are thought to be contributing to the rebound in home prices including limited inventory and an improving job climate. However, the most significant factor appears to be a looming interest rate rise which will increase the cost of home ownership, which is likely to begin later in 2015. While there is a significant question regarding the amount and frequency of these interest rates, most economists believe that it is virtually certain that the Federal Reserve will raise rates in 2015. This will lead to an increase in mortgage rates. A constrained supply is also thought to be a factor with only 5 months of inventory on the market, compared to the six months that typically exists in a normal market. However, some economists fear that the result of this constrained supply will mean that the increase in home prices is going to be short lived and prices will drop as the market conditions normalize.

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