DataQuick: Lack Of Inventory Continues To Drive Up Home Prices

U.S. home prices increased more than 13% in July compared to July 2012, according to DataQuick's monthly Property Intelligence Report (PIR).

Twenty-five of the 42 markets tracked by the PIR experienced home price increases in excess of 10%, the report finds. However, the increases varied widely from market to market – for example, in Suffolk County, N.Y., home prices increased only 1% in the past year, whereas in Sacramento County, Calif., they increased more than 30%.

Lack of inventory remains the primary factor driving home price increases. With the economy improving, foreclosures have decreased, which further adds to the lack of availability. According to the report, foreclosures decreased in 31 of the 42 markets tracked during July. What's more, foreclosures decreased in 26 of the 42 markets over the last quarter and in 28 of the 42 markets over the last year.

In addition, improving economic conditions and historically low interest rates – which are now on the rise as well – are resulting in increased demand.

Gordon Crawford, Ph.D, vice president of analytics for DataQuick, says rising home price increases amidst low sales volumes could be a cause for concern.

"We are seeing a direct correlation between home price appreciation and sales growth, as markets with the largest decrease in overall sales are those experiencing the most rapid increase in home prices," Crawford says in a release. "While economic drivers including job growth and low interest rates are contributing to increases in demand nationwide, prices in markets with tight supplies of available properties are skyrocketing. The main concern in this situation is that it is unclear if strong home price increases would be happening in the presence of more normal sales volumes."

Some markets in Florida saw increased sales growth but lower than average home prices as more existing and unoccupied properties are being made available for purchase, the report finds. In contrast, some markets in California and Nevada saw dramatic price increases due to the fact that a high percentage of homeowners are underwater in their mortgages and are therefore ‘trapped’ in their homes. This, combined with a lack of new construction, is decreasing inventory and driving up prices in those markets.

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