Home Prices on the Rise

A front page story in the Wall Street Journal highlights a rise in home prices in 1Q15 and how that might affect the apartment market:

The number of metropolitan areas that saw double-digit percentage increases in home prices more than doubled during the first quarter, reflecting a mix of thin supply and strong demand that points to heated competition for home buyers.

Fifty-one metro areas posted year-over-year double-digit price increases compared with 24 metro areas in the fourth quarter of 2014 and 37 in the first quarter a year ago, the National Association of Realtors said Monday…

The accelerating gains are a welcome sign for the spring selling season—a crucial period for sales because families typically want to lock in to a school district by the end of summer—and an early indication that the moderating gains of the past few years might be picking up. But affordability concerns could keep many would-be buyers out of the market…

In Winston-Salem, N.C., where prices are up more than 15%, broker Eric Munger said that clients are becoming discouraged by the lack of inventory. He said one client recently decided to renew his lease for six months because he couldn’t find a house to match his criteria.

The story goes on to describe how some economists think home builders will ramp up to meet the increasing demand, but others think that won’t happen until the employment picture in the country improves:

But builders disagree that a lack of new construction the sole factor for an unbalanced housing market. They blame relatively weak demand because of a relatively sluggish job market, young people putting off homeownership and people hesitating to put their homes on the market because they still can’t get prices to match what they paid during the boom.

And even when the demand does come back, it will take builders a while to ramp up production:

But Mr. Hamill said it will likely take several more years before builders have the capacity to fully meet demand. “We lost a lot of builders, lost a lot of trade contractors, we lost a lot of people to other industries,” he said of the lingering impact of the 2007-09 recession.

All in all the news still looks good for the apartment industry.