One of the most important signs that housing has turned a corner is that home prices, by almost every conceivable measure, are showing positive appreciation in 2012. Based on recent data, that appreciation continues to improve.
In July, the average closing price of a home was 14 percent higher than a year ago. The most dramatic gains were in distressed property sales from banks as a result of REO inventory declining, and there have been more potential buyers capitalizing on these bargain investments. The result is a 16 percent increase year-over-year in the average closing price of REOs. Regular resales saw an 11 percent increase in July, while the higher-priced new homes saw a more modest 6 percent rise. Healthy non-distressed resales also are capturing a greater share of market activity than a year ago, with 69 percent of closings. The distressed share has fallen from 30 percent to 24 percent, and new homes have remained relatively flat in the 7 percent range.
The housing market obviously has a long way to go on the road to recovery, but we are finally seeing consistent progress in price activity, which will open up the possibility of expanding transaction volume in the near term. The price gains are especially notable given the changes that have taken place in the home appraisal business, with appraisers having little incentive to stretch the value of any property.