Robust home prices impact commercial property appraisals

Commercial real estate stands to benefit from the side effects of surging home prices.

Commercial real estate companies stand to benefit as the surge in home prices spurs demand for durable goods.

Mortgage News Daily reported on CoreLogic data indicating a significant rise in home prices during May. On July 2, CoreLogic's Home Price Index jumped 12.2 percent in a year-over-year comparison. In addition to a 2.6 percent increase in home prices from April to May, the report also revealed that May was the 15th consecutive month that the Home Price Index experienced increases nationally, including distressed property sales.

"Home price appreciation, particularly in much of the western half of the U.S., is increasing at a torrid pace," said Anand Nallathambi, president and CEO of CoreLogic. "Across the country, pent-up demand and continued low interest rates are fueling strong demand for a limited inventory of properties. We expect that trend to continue to drive up prices throughout the balance of the summer months."

Even though prices are still below their peak experienced in 2006 – up to 20 percent in some regions – tight inventory, high demand, gains in employment and continued low mortgage rates continue to contribute to price increases. Short sales and distressed properties accounted for the smallest margin of overall sales in nearly four years, while previously owned homes surpassed the 5 million mark – a feat that hasn't been seen since 2009, as reported by USA Today. 

Aside from Delaware and Alabama, where prices fell, 48 states reported gains in home prices. Surprisingly, Nevada experienced the greatest margin of improvement of 26 percent. Arizona, California, Oregon and Hawaii followed closely behind, seeing home price increases ranging between 15 and 20 percent.

"It's been more than seven years since the housing market last experienced the increases that we saw in May, with indications that the summer months will continue to see significant gains," said Dr. Mark Fleming, chief economist for CoreLogic. "As we approach the half-way point of 2013, home prices continue to respond positively to the reductions in home inventory thus far."

Durable goods
As a side effect of an improving economy and increased activity in housing, there has been a parallel increase in demand for U.S. goods. While economists forecasted a 3 percent increase in demand for durable goods in May, orders exceeded expectations, rising 3.6 percent. As financial portfolios look more promising, more businesses are investing in long-lasting manufactured products – boosting industrial and commercial real estate activity.

"It points to further upside momentum for business capital investment activity," Millan Mulraine, a senior economist at TD Securities in New York, told Reuters. "It also signals increased confidence among the business community about the sustainability of the economic recovery – which could itself become self-fulfilling."

Share
Disclaimer: All data and information provided on this site is for informational purposes only. Zoliath.com makes no representations as to accuracy, completeness, correctness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, opinions or delays in this information or any losses, injuries, or damages arising from its display or use. All information is provided on an as-is basis.