Home Asking Prices Log Biggest Year-Over-Year Jump Since Recession
In August, home asking prices rose 2.3 percent year over year, the largest annual jump reported yet by online listing service Trulia's Price Monitor and the largest year-over-year increase since before the recession. Excluding foreclosures, asking prices rose nationally 3.8 percent year over year. The month-over-month increase of 0.8 percent was the seventh consecutive monthly increase. Two-thirds of large metros -- 68 out of 100 -- had year-over-year price increases, and even more -- 87 out of 100 -- had quarter-over-quarter increases.
Price Gains Accelerating Most in Arizona and Nevada
Let's look at the top 10 markets with the largest year-over-year price increases. Asking prices in Phoenix rose 24.2 percent year over year in August. Two other Southwest metros -- Tucson, Ariz., and Las Vegas -- are on the Top 10 list, along with four Florida metros (Cape Coral-Fort Myers, West Palm Beach, Miami and Orlando), Warren-Troy-Farmington Hills, Mich., Denver and San Jose, Calif. The Southwest metros of Tucson and Las Vegas have seen the biggest turnaround: three months ago, in May 2012, prices were falling year over year in those markets. In contrast, Miami's year-over-year price increase slowed, from 14.5 percent in May to 9.6 percent in August. Miami prices rose only 1.1 percent quarter over quarter -- which is below the national quarter-over-quarter increase of 1.8 percent! -- so Miami's gains aren't so hot anymore.
Among the 100 largest metro areas.
Rent Increases Slow to 4.7% Year Over Year, Thanks To New Construction
In August, rents rose nationally 4.7 percent year over year. That's the smallest year-over-year increase since March. Three months ago, in May, rents were up 5.8 percent year over year. What's slowing down those rent increases? One big factor is new construction: According to the census, there was a big jump in the number of newly completed buildings with five or more units – which means more rental units are on the market to meet demand. Completed new units in multifamily buildings in July -- the latest data available -- were 47 percent higher than a year earlier.
Among the largest 25 rental markets, rents rose the most in Houston and Seattle, where they climbed more than 10 percent year over year in August. But renters are getting a touch of relief in Denver, San Francisco, Miami, Oakland and Boston, where rents are no longer rising quite as fast as they were three months ago. That may not be much comfort, though, since these hot rental markets are still seeing annual rent increases of 8 percent or more.
Among the 25 largest rental markets.
Bringing It All Together: Prices, Rents and Wages
With price increases accelerating and rent increases decelerating, the national year-over-year price increase, excluding foreclosures, of 3.8 percent is gaining ground on the national year-over-year rent increase of 4.7 percent. If prices start rising faster than rents, then buying a home won't be getting any cheaper relative to renting.
And there's another milestone: With prices excluding foreclosures up 3.8 percent year over year, prices are also rising faster than wages, which rose 2.6 percent year over year in 2011 according to the Bureau of Labor Statistics. When price increases outpace wage increases, affordability starts to decline. (Check out our post comparing affordability across metros, showing how long it takes to save for a down payment.)
In short: Price increases are important for the housing recovery and are great news for homeowners, particularly those who are underwater. They're good news for the economy, too, since price increases encourage builders to start new construction, which in turn creates jobs. But this is a bit of a catch-22. Rising prices will also make housing less affordable for those who don't own, especially if prices start rising faster than wages.
Will these trends continue? Look for the next Trulia Price Monitor and Trulia Rent Monitor on Thursday, Oct. 4, 2012, at 10 a.m. EDT.
See more stories on Trulia:
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