According to the National Association of Realtors, home prices have been soaring by double digits compared to last year’s numbers and the National Association of REALTORS® are calling the rises “unsustainable.” The price for existing home sales surged 15.4 percent higher in May compared to last year.
“Some of the increases can be explained by the fact that it is recovering from an over-corrected situation,” says Lawrence Yun, NAR chief economist. “But with people’s income rising at only 1 or 2 percent and prices rising in double digits, it cannot continue.”
The price discounts for bank-owned homes are vanishing rapidly, says Rick Sharga of Carrington Mortgage Holdings. Prices of distressed homes — particularly in markets like California, Arizona, and Florida — are rising faster than traditional home prices. “You can at least make an argument that part of the dramatic increase in median home prices can be attributed to the foreclosure discount evaporating,” Sharga says. “That suggests that overall home price increases may be slightly overstated.”
However, according to NAR’s latest report, more expensive homes are seeing higher price rises. For example, homes priced at more than $500,000 have had prices soar 33 percent in the last year while homes priced below $100,000 have had prices down 9 percent year-over-year.
Source: “Home Price Rise ‘Unsustainable,’ Realtors Report Says,” CNBC (June 20, 2013)