Rising Home Prices Are Good News For Owners, Not So Much For Buyers
ROBERT SIEGEL, HOST:
This is ALL THINGS CONSIDERED, from NPR News. I'm Robert Siegel. And now, the latest in our series Number of the Year. We're taking numbers, and exploring what they tell us about the year that was 2013. Today, NPR's Yuki Noguchi reports on the number 13. That is the estimated percentage of how much home prices have risen this year.
YUKI NOGUCHI, BYLINE: That 13 percent is lucky - or unlucky, depending which side of home ownership you're on. Sarah-Jayne Ashenhurst Schmid and her husband watch from their rented apartment in Chicago as homes in their desired neighborhoods increase to the point where they fear buying is now out of reach.
SARAH-JAYNE ASHENHURST SCHMID: Even during like, the six months that we've been looking, the market's increased so much, and mortgage rates increased so much, that we're at a point now where we don't - like, we actually don't know if we're going to be able to buy in the market anymore.
NOGUCHI: They're having to offer more money, only to get outbid on homes that are smaller than the ones they considered earlier this year - which Schmid says feels odd because for the past couple years, they lived with the notion it was a buyer's market.
SCHMID: In the blink of an eye, everything is changing so rapidly in the other direction.
NOGUCHI: For Chris Race(ph) in Las Vegas, on the other hand, the rise in home prices this year was a great blessing.
CHRIS RACE: We actually saw a flip - from being underwater so much we had no dream of selling anytime soon, to being able to make a profit enough to move into a new home.
NOGUCHI: And that's what Race did, selling his townhome in July and using the proceeds to buy a new place that's twice as big. This is, overall, the story of the housing market this year. The data for the full year won't come until early next year, but there are several indications 2013 was a stellar year for home owners. Case-Shiller's 20-city index increased over 13 percent so far this year. The National Association of Realtors projects a slightly lower estimate. It says housing prices will end 2013 up about 11 percent from last year.
But the group's chief economist, Lawrence Yun, says any year with a double-digit increase is extraordinary.
LAWRENCE YUN: The exceptionally tight supply is the reason for the higher home values.
NOGUCHI: Yun says scarcity of available homes, both new and resale, drove prices up way faster than wages increases. He says the downside of the rapid gain is that buyers are getting discouraged. Foot traffic has dropped off at open houses. Jed Kolko is chief economist for the real estate website Trulia. He says he expects the year to end with 12- to 13-percent gains in home prices.
JED KOLKO: The last time we saw depreciation that strong was during the bubble. Thirteen percent is a rate that can't be sustained and if it continued, it would become unhealthy.
NOGUCHI: But for this year, Kolko says, it went a long way to helping the housing sector recover. The only downside was that home buyers had trouble finding places; and affordability declined 20 percent, partly due to higher sticker prices, and partly because interest rates rose. Kolko says some markets on the West Coast saw prices skyrocket as much as 30 percent while in the Northeast, the increase was flat or in the low single digits. Next year, he says, he expects to see the regional dynamics change.
KOLKO: I'm thinking next year, a lot of the housing activity is going to shift inland.
NOGUCHI: He says the Midwest and mountain states have more space for building, and those areas will see higher demand and bigger price growth, especially as investor buying cools down in other areas. Overall, analysts expect next year's home price growth will come in at a saner, but still respectable, 5 percent.
Yuki Noguchi, NPR News, Washington.
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