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Rising home prices, building activity could yield additional homebuying as 2012 winds down

Posted on Thursday, November 8, 2012 at 5:00:49 PM

Home prices in metropolitan areas throughout the country increased significantly so far this year. This development has a number of positive implications for the real estate industry.

During the third quarter, property values appreciated in 120 of the nation's 149 largest metropolitan statistical areas, according to a report from the National Association of Realtors. This was a notable gain from the second quarter when 110 cities reported similar trends and a year earlier when just 39 metros saw improvement.

According to NAR chief economist Lawrence Yun, rising home prices in the nation's largest cities is the direct result of thinning inventories, which have been unable to keep up with buyer demand.

"Earlier this year, a broad equilibrium began to develop in most areas between homebuyers and sellers, which led to a sustained upturn in home prices," Yun said. "We expect fairly normal appreciation patterns in 2013, but there is a risk of price acceleration if builders are unable to increase supply to meet the needs of our growing population and household formation."

When examining properties in every area of the United States, prices increased 7.6 percent to $186,100 in the third quarter, the report said. Although the prospect of buying a home become slightly less affordable during the third quarter, borrowers should examine a mortgage comparison chart to determine if they have options to make the transition to homeownership.  

Builder confidence on the rise
To fill the void of the dwindling property inventory, homebuilding activity is once again on the rise. Many residential construction companies have recognized the need for new homes and their confidence level subsequently increase in October.

The confidence increased to a mark of 41 out of 100 during the month, according to the National Association of Home Builders. The was the highest level recorded since prior to the real estate bubble burst in 2006.   

However, NAHB chairman Barry Rutenberg noted that strict lending regulation could hold builders back from constructing additional residential properties despite the rising demand among consumers.

"Many builders are reporting increases in the number of serious buyers visiting their sales offices, and the overall confidence measure is much higher than it was at this time last year," Rutenberg said.ADNFCR-16001052-ID-800902645-ADNFCR