US Real Estate Market Review

It is looking more and more like housing is in a recovery mode. On a national level, sales of new homes spiked 9.6% in July or 433,000 units. That was 40,000 more sales than were forecasted. The increase was also the largest since February 2005. The bump in sales helped reduce the inventory of new homes a 7.5-month supply, the lowest in 16 years.

According to the S&P/Case-Shiller home-price index, 18 of the 20 cities tracked showed improvement in June, up from eight in May, four in April, and only one in March. Robert Shiller, co-creator of the index and a vocal bear on housing, admitted to Bloomberg that "we might be seeing a turnaround."

While most of the recovery has been seen in lower priced homes, that appears to be shifting as well. Toll Brothers, a luxury homebuilder, is feeling confident enough to start reducing incentives and raising prices in selected communities. CEO Robert Toll said, "We believe that customers are recognizing that now is the time to get into the market to take advantage of near-record affordability in what is still, for now, a buyer's market."

The broader economic news seems to be picking a bit as well. Thanks mainly to the "cash for clunkers" program, durable goods jumped 4.9% in July. GDP shrank by 1%in the second quarter of 09, but that was significantly less than the previous 2 quarters. Up to 9.7% in August, unemployment remains a significant problem; however, many of the so-called discouraged workers are renewing their search. While this increases the unemployment figures, it is usually a sign that optimism is returning and a recession is beginning to fade.

Finally, mortgage rates continue to hold steady. The 30-year fixed-rate loan is still at 5.5% while the 15-year fixed-rate and five-year adjustable-rate loans continue to hover below 5%. Today's housing market remains a buyer's market, with low prices and low borrowing rates, but that may be beginning to change.

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