Home values continued to climb in September, marking the sixth consecutive month of increasing home prices, a widely-followed price index reported Tuesday. The S&P/Case-Shiller Home Price Indices also reported prices continued to strengthen quarter-over-quarter, with national prices almost 4 percent higher than third quarter numbers last year, and more than 2 percent above last quarter.
"With six months of consistently rising home prices, it is safe to say that we are now in the midst of a recovery in the housing market," David M. Blitzer, chairman of the index committee at S&P Dow Jones Indices, said in a release.
A combination of low but improving home prices, surging rents, and rock-bottom mortgage rates have all played a role in luring would-be homebuyers back to the American real estate market and juicing demand. The share of distressed properties (which tend to sell at deep discounts and weigh down home prices) has also been steadily falling.
"The reason prices are rising is simple: the law of supply of and demand," Glenn Kelman, CEO of Seattle-based real estate website Redfin, wrote in an E-mail. "When Redfin's agents talk to homeowners about listing their place, most decide that time is now on their side, and want to wait until prices improve more. So there's hardly anything for sale. And because prices are fairly low, and interest rates are very low, demand is up. With rents at five-year highs, even the folks who hadn't planned on buying a home are reconsidering."
The result has been bidding wars on reasonably-priced properties in hot real estate markets such as San Francisco, Phoenix, and Washington D.C., Kelman says.
But despite marked broad-based improvement in prices, the Case-Shiller indices remain roughly 30 percent off their 2006 peaks. Furthermore, headline index numbers aren't seasonally adjusted and the housing market is heading into the slow winter months. Experts also expect foreclosures to make up a larger portion of sales in coming months.
"September will likely be the last hurrah for Case-Shiller in 2012 in terms of monthly gains," Stan Humphries, chief economist at real estate website Zillow wrote in an E-mail. "We expect the monthly numbers to be negative for the balance of the year, due to seasonality and increased prevalence of foreclosures in the sales mix."
On the bright side, the coming pullback in monthly numbers isn't a cause for concern because the indices will still end up more than 3 percent above prices seen a year ago, "clear evidence of a durable housing recovery," Humphries adds.
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Meg Handley is a reporter for U.S. News & World Report. You can follow her on Twitter or reach her at firstname.lastname@example.org.