Housing prices show signs of strengthening

Housing may not have powered the U.S. economy in 2012, but real estate stopped dragging things down and again became an engine for growth.

Data out this week showed Phoenix scorching the nation with a 21.7 percent increase in home prices even as metropolitan areas far from the frontier, such as Washington (4.4 percent) and Boston (1.6 percent), booked their own gains.

"Hopefully, we'll look back at 2012 as a transition year," said Steve Storti, Berwyn-based senior vice president of marketing at Prudential Fox & Roach Realtors. "Just as you can only declare a recession after the fact, maybe we'll be able to say this is when it changed over."

Given the improving job market and low mortgage rates, 2013 is expected to be an even better year to buy or sell a house, said Patrick Newport, U.S. economist with IHS Global Insight.

On Thursday, the Census Bureau offered the latest evidence that housing continues to climb out of the deep trench dug by the 2008 financial crisis. Sales of new homes in November rose 4.4 percent to an annual rate of 377,000 from October, according to the monthly government survey. That's the highest level in two years.

Prices also were higher, with the median sales price increasing to $246,200 compared with $237,500 in October.

Newport cautioned, however, against reading too much into monthly new-home sales data, which he said are "badly estimated" and subject to major revision. Though new-home sales touched their highest level since April 2010, the latest report "was not a promising update," he wrote in a note to clients of the Lexington, Mass., economic-forecasting firm.

Sales have been "hardly growing at all" in the fourth quarter, Newport noted, having decelerated from 2.8 percent in the second quarter and 1.3 percent in the third quarter. IHS Global Insight does not expect new-home sales to return to normal levels until 2015.

Still, the new-home sales report is the latest in a string of statistical measures that indicate a healing, if not entirely healthy, housing market in the United States.

Wednesday's S&P/Case-Shiller Home Price Index reported that prices in October were up in 18 of 20 cities year-over-year. (Philadelphia is not among the 20 cities in the composite index.) Phoenix's prices rose for the 13th month in a row, San Diego's for a ninth consecutive month.

Last week, the National Association of Realtors said sales of previously owned homes rose 5.9 percent to an annual rate of 5.04 million in November compared with October's levels. Sales were up 14.5 percent year over year.

Locally, the housing picture has improved as well, with the number of properties sold up by double-digit percentage increases in every county in November, according to Prudential Fox & Roach's HomExpert Market Report. Prices were up in Philadelphia and four suburban counties, but down in Chester, Camden, and Gloucester Counties.

Ask a few real estate agents in the region about what they're experiencing, and they respond first by saying the health of the real estate market is all relative, varying block by block, neighborhood by neighborhood, town by town.

Both Chris Artur, of Artur Realty in Northeast Philadelphia, and Art Herling, of Long & Foster Real Estate's Blue Bell office, lamented a continued lack of first-time buyers, who typically account for more than 40 percent of those purchasing single-family homes.

"We have the lowest interest rates in the entire world," said Artur, who makes his living selling the rowhouses that are the staple of first-time buyers. "There should be a line at the door to buy houses, but there are no lines."

In the suburbs, Herling said, the decline in first-time buyers - which he pegged at a low 35 percent of purchasers - hurts because they drive the overall market. Without them, there is less "trade-up" activity - homeowners stay put rather than moving into bigger or better houses.

As to why home prices are on the rise in many U.S. markets, Newport pointed to the supply of houses for sale. Nationally, inventories in November stood at 2.03 million homes, or 4.8 months of supply, the lowest level since December 2001.

Why are inventories declining? Builders are not constructing enough houses to meet replacement demand as well as demand from new household formation, Newport said.

Storti said inventories began declining locally in 2012 after years of holding steady. Because it is not a growth area like Las Vegas or Phoenix, the Philadelphia region largely avoided inventory overhang caused by furious construction of new housing.

Area homeowners who might have tested the market in 2008 or 2009 only to pull back from a less-than-favorable sale may feel sufficiently confident of an improving economy and rising home prices to try again this spring, he said.

"This market wants to persist," Storti said. "There is enough pent-up demand in this market. Hopefully, we'll start to pick up in 2013."