Dwindling inventory could drive prices even higher this year, lead to more bidding wars and “put the seller in the driver’s seat,” said Jed Kolko, chief economist at Trulia, a real estate research firm.
That could be bad news for struggling homeowners looking to enter the market. The price of single-family homes across the nation rose 9.3 percent through February, the biggest increase since May 2006, according to the closely watched Standard & Poor’s Case-Shiller home price index.
All of the 20 major metropolitan regions tracked by the home price index had higher home prices compared with a year ago. Cities with the highest price increases included Phoenix and San Francisco, where prices rose 23 percent and 18.9 percent, respectively.
Home prices in the Washington region rose by nearly 7 percent compared with the same period last year, according to the Case-Shiller index.
That jump in prices has been driven, in part, by a housing inventory that has reached a 12-year low, Kolko said.
The country’s population continues to grow, but new homes aren’t being built fast enough. “Home builders have been very slow to respond to rising home values because of the difficulty in obtaining construction loans from banks,” said Lawrence Yun, chief economist at the National Association of Realtors.
A bigger factor may be that many homeowners considering selling their homes have been held back by one fear: They may be able to sell but unable to buy, Yun said. They may not be able to afford another home, given rising prices and the fierce competition.
Despite recent price increases, millions of homeowners also remain underwater on their mortgages, owing more than their homes are worth, and would have to sell at a loss. Others may be able to sell their home but not qualify for a loan to buy another one.
In regions hardest hit by the housing downturn, such as Florida, Nevada and California, home buyers also face fierce competition from investors, analysts have said.
Eventually, rising home prices will begin to drive more homes onto the market, analysts said. “People who have been underwater for several years now see light at the end of the tunnel,” said Michael Simonsen, chief executive of Altos Research.“They’re thinking, ‘Maybe I’m not going to lose money on my house if I sell now.’ ”
Another bright spot in the housing market remains declining foreclosure rates. There were 55,000 completed foreclosures through March 2013, a decrease of 16 percent compared with the same period last year and 52 percent from the peak period in 2010, according to a monthly report from research firm CoreLogic released Tuesday.
As homes move through the foreclosure process, and fewer borrowers fall into delinquency, distressed property sales shouldn’t weigh on home prices as much, analysts said.
Nationally, the number of homes in the foreclosure process fell to 2.8 percent of all homes with a mortgage, compared with 3.5 percent a year ago. The foreclosure inventory fell slightly in Virginia and in the District to 0.9 percent and 2.2 percent of all homes with a mortgage, respectively. The inventory increased in Maryland, reaching 3.5 percent.
The housing market is about to enter its peak summer selling season, analysts said, which could spur another increase in sales — and prices.
But the housing shortage is expected to remain a problem through the end of the year — or until enough homeowners find a reason to sell, they warned. “If enough people decide that prices have risen enough and it’s time to sell, we could see an increase,” said Kolko, the Trulia economist.