Rising rates, prices pave way to more balanced housing market

San Francisco, one of three metros experiencing double-digit home price growth, is part of a market balancing act.

While mortgage rates and home prices are on the rise, the number of home sales in June point toward a market equilibrium in the future and robust commercial appraisals.

HousingWire reported data from Redfin's June home price tracker that indicates a 19 percent year-over-year increase in home prices in 19 major U.S. markets. The rise in prices – partly a result of high demand, partly a result of low home inventory – has encouraged home builders. According to Redfin, inventory grew for the third consecutive month and is expected to continue throughout the rest of year as development projects come online. Major metropolitan markets, such as Las Vegas, San Francisco and Sacramento, experienced the greatest year-over year price increases. Ranging between 33 and 38 percent, it is likely that the strong economic performances by the tech industry have assisted the rebound of home prices in these markets.

However, the number of homes for sale declined by 19 percent in a year-over-year comparison. There was a 2.4 percent month-over-month increase in home sales activity, the third month of positive inventory growth. These figures represent somewhat of a mixed result. More inventory is entering the market as construction starts trend upward, however, distressed property has declined significantly. Nationwide, foreclosed home inventory has experienced year-over-year double-digit declines each month for the past 8 months. In May, there were just 1 million foreclosed homes on the market – down 29 percent from a year ago, according to CoreLogic's July MarketPulse report.

The market is heating up
With mortgage rates hovering around 4.5 percent, the fear that rates would significantly impact the housing recovery seems to be retreating. Buyers still seem eager to strike a deal, as mortgage rates are still historically very low, according to the Savannah Morning News.

"No matter which way rates go, we're still going to see sales at a good pace here," said Donna Davis, president of the Savannah Area Board of Realtors. "There were 30-year mortgages out there right at 3 percent. It was crazy – wonderfully crazy, but crazy."

As a result, demand for manufactured goods has the industrial sector seeing its best performance in nearly four months, as reported by Bloomberg. Output from factories and utilities climbed 0.3 percent – the largest increase since February, according to data from a Federal Reserve report.

"We expect activity to pick up over the second half of the year," said Richard Moody, chief economist at Regions Financial Group. "It's not going to be gangbusters growth, but it's at least going to be better than what we saw over the last two to three months."

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