In major 20 cities throughout the U.S., home values rose at a faster rate in the first quarter of 2015 than analysts had predicted in 2014. The Wall Street Journal and Bloomberg Business both report that a limited number of available homes is likely to continue driving values up for the rest of the year.
According to the SandP/Case-Shiller index report, released on May 26, property values have increased by 4.1% since March 2014. Bloomberg has reported, from a survey of 25 economists, that the estimated year-over-year increase between 2014 and 2015 will be 4.1%.
When Bloomberg asked economists last year how much the housing market would increase during the first quarter of 2015, the closest estimate was 5.05%
The two U.S. cities with the highest first-quarter gains are San Francisco, with 10.3%, and Denver, with 10%.
Although most U.S. cities haven’t seen such an incredible rise in home values as San Francisco and Denver, Bloomberg has cited the National Association of Realtors as stating that in April 2015, it took an average of 39 days to sell a house in the U.S.
According to U.S News and World Report, “home values are rising at a faster rate than incomes, potentially pricing many would-be buyers out of the market.”
It’s possible that a portion of the housing market spike has been caused by increased home repairs; earlier in May, home improvement stores like the Home Depot and Lowe’s saw a notable increase in sales, partly because of the warmer spring weather but also because more homeowners finally have enough money to splurge on home repair projects that aren’t entirely necessary.
Rather than being forced to focus on immediate value, homeowners have begun focusing more on long-term return on investment (ROI). A steel door replacement, for example, is costly upfront but produced an ROI of about 98%, on average.
It’s to be expected that this extra value should reflect back on home prices overall.
The WSJ states that “some economists…are concerned that prices are continuing to rise out of step with buyers’ incomes,” but according to Bloomberg, fixed mortgage rates at the end of May were at 3.84% and are likely to remain “attractive” to buyers in the near future.