NEW YORK — Home prices are beginning to rise after a six-year slump in cities from San Francisco and Seattle to Miami with jobs and lifestyles that appeal to younger and affluent buyers.
“A number of the cities that have done the best have been glamour cities,” Robert Shiller, an economics professor at Yale University and co-creator of the S&P/Case-Shiller property-value indexes, said Wednesday. “People have this speculative fervor. It comes back.”
A tight supply of homes and an increase in affordability fueled by record low mortgage rates are helping shore up some regional markets where values plunged during the recession.
San Francisco’s home prices surged at a 16 percent annual rate in the three months ended in April, while Phoenix gained at a 26 percent rate, according to Case-Shiller.
“Glamour cities where people want to move to and reside have always been on the East Coast and West Coast,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ.
“The drop in mortgage rates closer to 3.5 percent helped stimulate demand,” while sellers holding homes off the market caused “not a lot of supply, and what was out there got bid up.”
An index of pending home resales in the U.S. climbed 5.9 percent in May, figures from the National Association of Realtors (NAR) showed Wednesday.
Brian Adamski, a Phoenix-based real estate agent, said that buyers he represents have put in bids on houses that have received as many as 40 offers.
Inventory is especially slim for properties priced below $200,000, which are popular with cash buyers, he said.
“If you have a good product, priced reasonably well, it will go quick,” he said.
Prices rose at annual rates of 12 percent over the past three months in Seattle; 11 percent in Tampa, Fla.; 8.3 percent in San Diego; and 8.2 percent in Miami, according to the Case-Shiller indexes.
Some former housing-bubble markets haven’t fared as well. Prices rose at a 2.6 percent rate in Las Vegas, and fell at a 4.3 percent rate in Atlanta and 7.3 percent rate in New York.
SunTrust Banks Inc., which is based in Atlanta and operates mostly in the U.S. Southeast, said housing is picking up in South Florida markets such as Miami, which were hit hard during the slump.
The city is “having a remarkably fast recovery,” CEO William Rogers said May 15.
“Miami got punched in the face and got two black eyes, but it’s going to recover because of where it’s located,” said Joe Higgins, a broker in Coconut Grove, Fla. “The Miami market is very active.”
The prime cities, neighborhoods and property types, such as Palm Beach County in Florida and condominiums in Miami’s Brickell neighborhood, are drawing the most demand, pushing prices up, said Brad Hunter, chief economist for Metrostudy, a Houston-based firm that tracks housing starts.
“These glamour markets are also 24-hour, international gateway cities, which do business worldwide and they attract demand from global buyers” such as the Brazilians who’ve been purchasing properties in Miami, he said.
In San Francisco, prices are being driven up by the soaring technology industry.
In May, a record 211,400 people were employed in the city’s professional services sector, which includes computer design, an increase of 12,400 positions from a year earlier, according to the California Employment Development Department.
Jobs in health care and private education services, leisure and hospitality also had larger-than-normal annual increases.
With inventory low, properties in the city’s Noe Valley and Dolores Heights neighborhoods are getting multiple offers, said Suhl Chin, an agent at Zephyr Real Estate.
A “fixer” three-bedroom on Liberty Hill had 12 bids and is in contract for over $1.5 million, she said.
Listings at $1 million to $2 million are the “opening price point for a lot of tech workers getting their options at emerging companies,” according to Joel Goodrich, a broker at TRI/Coldwell Banker.
His penthouse listing at the SOMA Grand high-rise on Mission Street may fetch $1,100 a square foot, he said.
“San Francisco is enjoying a combination of mega-factors, high among them the tech industry,” Goodrich said. “People are coming from London, China, New York and L.A.”
Cities with large numbers of upper-income households are faring best, said Mark Vitner, a Wells Fargo & Co. senior economist.
“This is a bifurcated economy where the well-to-do, and more highly educated and folks in the right places are doing relatively well, and sales are taking off for those guys,” he said.
U.S. homebuyers also are benefiting from falling borrowing costs. The average 30-year U.S. mortgage rate dropped to 3.66 percent in the week ended June 21, the lowest in records dating to 1971 at McLean, Va.-based mortgage-finance company Freddie Mac.
Some economists said it may be too early to call a broader recovery.
“Demand coming from investors” might be contributing to gains in markets where prices are jumping, said Patrick Newport, an economist for IHS Global Insight in Lexington, Mass.
“I think that it is too soon to come to any conclusions about where home prices are heading, given the number of homeowners delinquent on their mortgage, and given that the Case-Shiller indices hit cyclical lows in March.”
Overall, the S&P/Case-Shiller index of property values in 20 cities dropped 1.9 percent in April from a year earlier, the smallest decline since November 2010, after decreasing 2.6 percent in the year ended March.
The index’s co-creator said he remains encouraged.
“There are signs of strength,” Shiller said. Still, surveys of home buyers show a continued lowering of expectations on prices, he said. “Those expectations have just been down, down, down steadily.”
I wonder if more pinballs are showing up on the market?
If you want some real entertainment about real estate in s. cal take a peek at that show million dollar listing on bravo.
What’s up with SDDT? The link says you need a subscription to view the article but they hijacked it from bloomberg word for word.
Looks like everyone is expecting the spring bounce to carry on into the fall and it might if things stay hot.
Thanks, I changed it.
According to Data Quick median home prices are rising because higher priced homes are selling. But an alarming fact is that since the beginning of the year absentee buyers and investors are buying up properties at all time record highs. A majority of sales are by investors that never step foot in the property, pay cash, and outbid locals. I questioned who are these investors and came to the conclusion a majority are Asian buyers taking advantage of the EB-5 program which grants visas if they invest in as little as $500k. Check out the article “Courting the Chinese Buyer” on the and you’ll see the same cities listed in this blog. I’m getting the hint that a Asian investment in real estate is bubbling big time! What happens when investors no longer want these investments and who’s going to buy them? Housing should be based on living needs not investment practices where one person buys multiple properties and never lives in them. This greedy mentality is what got us in the housing crisis in the first place.
I thought this was an interesting “flip-side” to the “frenzy” idea.
If appraisers are protecting the banks, it’ll be difficult for prices to run-up the way they once did. Price increases will have to be driven by cash-buyers, not borrowers:
It’s a slow day for real estate news if media-types are bringing up appraisals again. The knuckleheads at NAR are expected to make stupid self-serving statements whether true or not, and that won’t change.
Media types should ignore everything from NAR, and talk to me or other realtors on the street if they want to know about appraisal issues.
I have had no issues with appraisals coming in right.
I won’t have any as long as the appraiser is given the sales price, and told to hit it, which is the current policy.
I just told a buyer about how the process works, so he hired his own appraiser…..who brought in her appraised value at 10% under the sales price.
I promised a case of beer that the bank’s appraisal would come in at the sales price, and sure enough – it did.
I’m curious to see how all these investment purchased properties turn out 5 years down the road when the investors aren’t chasing rental properties anymore. Will they fire sale them, will they just hold on to them, will there be a generation of new buyers that can afford to buy them for more. Some markets and investors will probably do well but many will probably also curse the day they got involved. Frenzies are usually not where you want to be when it comes to investments.
Jim – what did your buyer think about the lower appraisal? Did they think they paid too much? Can they use it as a bargaining tool assuming they haven’t lifted the appraisal contingency?
We examined both appraisals carefully, and they used different comps.
There’s going to be a +/- 10% to any house these days due to the location, condition, and the lack of recent sales in general. The appraiser’s competency is a variable too.
We did get $10,000 off on a $500,000 sale with an alleged higher backup offer waiting in the wings. But all listing agents expect you to just roll over, and getting them to do the right thing is an art.
Jim, did you have fewer contingencies than the alleged higher backup offer or did you just “Read” the listing agent?
Look, up in the sky! is it a bird? is it a plane? No its billions and billions of QE dollars coming home to roost in an excellent hard asset………..property!
Tom – I outwitted the competing buyer’s agent.
When they realized that they lost, they came running back in with a much higher offer.
But by then it was too late – the mighty klingemeister had struck again.
Where I live (Palos Verdes) there is a huge influx of asians.
The listing agent countered both offers with a $515,000 purchase price.
Big mistake – you should always counter for highest-and-best, and let the buyers decide who the winner is. Buyers feel that like they had a fair shot to buy, and the seller gets top dollar. Win-win.
But she didn’t – she presented both buyers with the same price, $515,000, with no clear instructions on how the winner would be selected.
The other buyer signed it at $515,000.
We countered $517,000, and the seller signed it.
We went back for the $10,000 later.
cnbc.com might be coming around:
But conservative and free market economists have long been passionate in their belief that the foreclosure process should be allowed to work efficiently. Delays in clearing the huge backlog of distressed properties will only push back a meaningful recovery of the housing market, they say.
The Nevada law, passed in October, may be the most stringent: It imposes criminal penalties on lenders that try to foreclose without the proper paperwork. That has led to a dramatic drop in foreclosures in a state that was among the hardest-hit by the housing crash.
In September, banks filed nearly 5,000 foreclosure notices in Nevada. By February, just 460 were served, according to online foreclosure property marketplace RealtyTrac.
Ricky Beach, a real estate agent in Reno, Nevada, said the new law, AB 284, “has pretty much killed the market here.” The lack of foreclosure activity has led to a dearth of inventory, he said, with the number of homes for sale in the area down to 778 today from more than 1,700 in September.
This has triggered a “mini-bubble” in housing prices because the few properties available are receiving multiple bids. The only problem: No one thinks the gains are sustainable.
“The bill did nothing to solve the crisis—it’s just prolonged it,” Beach said. “Sooner or later the banks will work out how to deal with the law. And then foreclosures will hit the market, and prices will crash back down.”
Malik Ahmad, a Las Vegas foreclosure defense lawyer who has spent the last six years trying to help vulnerable borrowers deal with unscrupulous banks, said the law had completely changed his view of the nature of the crisis.
“This law has become a mockery,” Ahmad said. “I am now turning down clients every day who I know have no intention of ever trying to pay their mortgage. They just want to stay in their homes for free. And that is a bad situation for everyone, lenders and homeowners.”
Jim, During my last experience I countered with $5000 over the “other buyers” written offer, but was turned down. My offer was cash, so was the other buyers. So that trick doesn’t always work! The seller sold at the lower (list) price.
I submitted my higher offer within a couple hours of the other, seller still didn’t go for it.
The magic isn’t in the wand, it’s in the magician.
Hahaha FTW Jim Jamalamma!
J.M. I bet that “seller” never saw your cash offer. I bet the realtor had a buddy that wanted it and held your offer back. Why would any seller turn down $5,000 cash?