The Housing Market Is Heating Up

The real estate market is a great gauge of economic conditions because it is a reflection on consumer confidence, spending capacity, unemployment rate and the health of the economy as a whole.

According to Douglas Elliman Real Estate market reports, housing prices in Manhattan rose 7.7% at the end of the second quarter of 2015 compared to the same period last year, and prices in Brooklyn jumped up by 5.2%.

The rising prices show an increase in housing demand, which indicates an increase in Consumer confidence.

After peaking in 2006, a correction in housing prices triggered the subprime mortgage meltdown and eventually an economy wide financial crisis. Housing prices continued to slide, reaching a new low in 2012 as the US economy battled a recession.

“I think the housing market is the most important economic indicator, not only because of the housing starts are highly sensitive to changes in mortgage rates, which are affected by changes in interest rates. Although this indicator is highly volatile, it represents about 4% of annual GDP, and can signal changes in the economy and the effects of current financial conditions. Analysts and economists know to watch for longer-term trends in housing starts”, says by Emma Hao of Douglas Elliman Real Estate.

An increase in housing prices also weighs on the buyers’ minds and concerns about affordability have dented sales. Manhattan saw an almost 20% drop in sales while Brooklyn suffered a decline of 16.8% in sales as compared to last year. Other cities like Miami and Fort Lauderdale too saw prices go up and sales trend downward.

But experts say this is no cause for alarm.

“ The number of sales fell from prior year levels indicating that the pent-up demand unleashed on the market in 2013–2014 has been fully absorbed”, said the Doughlas Elliman market report.

This confidence stems from trends in housing inventories over the last few years. Experts believe while rising prices lead to higher inventory, the supply continues to remain below the long term average.

Doughlas Elliman’s Manhattan Decade Report 2005–2014 states, “For the past decade, Manhattan apartment prices set new records in 2014 from an improving local economy, low mortgage rates and low inventory. Despite tight mortgage lending conditions, Manhattan had the third most sales in 26 years and one of the fastest moving markets”

More good news emanates from the Los Angeles where prices rose by 4.8% and sales by 6.5%. Queens, New York also displayed a similar trend where both prices and sales went up 8.5% and 5.6% respectively.

With buyers clamoring for houses pushing prices higher, the American real estate market is heating up. It may not be as vibrant as it was before the recession, but it certainly looks like its got its mojo back.

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