Home Prices Still on the Upswing

After seven straight months of slowdown in activity, we are still seeing increased prices. April ticked up a bit and things are looking brighter as we move forward. Employment is up, families are growing and many who were unable to buy are getting back in the market; whether due to their home values increasing or them having waited out the required time following a distressed sale. A growing economy and pent up demand will also put upward pressure on prices. Consumer confidence is also back to pre-recession levels.
OC prices were up 7.7% year over year in April even though sales are down. Prices are continuing to rise, although not at the 20% pace we saw a while back. Analysts are expecting increases in the 7% range this year nationally and 9.4% in California. Even with interest rates projected to reach 5% by the end of the year, that rate will still be historically low and likely not deter expansion.
One interesting factor is the lack of new homes. Builders are struggling through increased costs for materials even though there is a very low supply of those homes. They are expected to increase nearly 30% this year.
Another factor that will support housing is banks having over $2 Trillion in reserves. They want to use that for home loans.